in 1.7.8 was added what we now know as UUID and the skins are applied through this system, versions prior to this can not be applied or see the skins because previously they were applied by username, and I don't think it's a bug.
I am experiencing the same problem and it does not allow me to log in with a microsoft account. I am on Windows 7, I tried logging in on another version (Windows 8) and it works perfectly. I checked on 3 different internet connections and the problem persists.
[media]
seems to be the same problem as this one MCL-19840