When a Windows 2000 or Windows XP client attempts to connect to Terminal Services running on a Windows Server 2003 computer, they are unable to connect. They receive the following error:

The remote session was disconnected because the local computer client access license could not be upgraded or renewed.

The Application event log on the Terminal Server records:

Event Type: Information
Event Source: TermService
Event Category: None
Event ID: 1011
Time: HH:MM:SS
User: N/A
Description: The terminal server client <UserName> has been disconnected because its temporary license has expired. For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.

This problem is generally the result of having the Licensing Mode in Terminal Services set to Per Device, when the Terminal Server Licensing server only has Per User CALS.

To fix this problem:

1. Open Terminal Services Configuration from the Start menu Administrative Tools folder.

2. Press Server Settings and double-click Licensing Mode.

3. Change the Licensing Mode to Per User.

4. Press OK.

NOTE: Windows Server 2003 does NOT currently manage User CALS, but this DOES NOT remove your obligation to adhere to the EULA. I quote the following excerpt for the the Windows Server 2003 End User License Agreement:

"Two different TS CALs are available to you: "Device" and "User." Each TS Device CAL permits one Device (used by any User) to conduct Windows Sessions on any of your Servers. Each TS User CAL permits one User (using any Device) to conduct Windows Sessions on any of your Servers. You may use a mix of TS Device CALs and TS User CALs simultaneously with the Server Software in your environment. You can have a Terminal Server request Per User licenses or Per Device (default) but not both simultaneously."

For additional information about Windows Server 2003 Terminal Server Licensing, see: