Is China Really Going to Crack Down on VoIP?

Last month, the Chinese Ministry of Industry issued a notice calling they will begin cracking down and ban “illegal VoIP” phone services in China. The announcement, which many believe is designed to protect the interests of State-owned telecom carriers, has, as you can imagine, caused concerns that VoIP companies such as Skype will be forced out of China.

During a recent telecom industry conference, Wen Ku, director of the Industry Ministry’s Technology department said “the ministry is not against Internet-based telephone services, but only those operating illegally in the country”. He went on to state “VoIP phone service is a world trend in the telecom industry, and China is not against VoIP technology,”.

Another Ministry of Industry spokesman, said the “issue is over”, and refused to comment on whether the ministry will adopt any measures to crack down on Skype. This is possibly a sign that China may not ban VoIP.

China has been vague on what constitutes an illegal VoIP service. The ministry on Dec 10 called for a crackdown “on illegal VoIP telephone services” and said it was collecting evidence against them.

At the conference, Wen would not define what an illegal VoIP service is but noted that the crackdown is mainly to fight on-line crimes and fraud done through VoIP services.

Since 2005, Chinese authorities have permitted only China Telecom and China Netcom, to conduct trial VoIP services in four cities. Experts say that this rule technically means that all VoIP phone services provided by other companies are illegal, said Wang Yuquan, senior consultant with research firm Frost & Sullivan in China.

These pilot programs never happened, and the so-called illegal VoIP services have grown rapidly since that time.

Experts believe that Chinese authorities will be extremely cautious in dealing with the regulations to avoid raising international concerns and do anything that could harm their economy.

China does not want to see another foreign company forced out of China (due to censorship), especially after what happened with Google.

Skype’s partner in China, TOM Group, said earlier this week that the Web-based calling service complies with the Chinese law.

A TOM Group spokeswoman said that “the operation of Skype in China is compliant with local laws and regulations” and “it is business as usual”. Chinese users currently have no problems accessing Skype.