China Erects Wall Against SkypeChina Erects Wall Against Skype

China is starting off the new year by flexing its control over Voice over IP (VoIP) telephone services such as Skype.

The nation's Ministry of Information and Industry Technology (MIIT) on Friday said it will crack down on "illegal VoIP telephone services," and was collecting evidence for legal cases against them. Only state-run China Mobile, China Telecom, and China Unicom will offer VoIP in this nation of about 1.3 billion people, an MIIT spokesperson told the South China Morning Post.

The move will protect China's big three telecommunications giants, professor Kan Kaili of the Beijing University of Posts and Telecommunications told the Morning Post. "The regulator's mindset will never change," he said. "The officials are obsessed with ideas on how to protect the state giants, rather than considering the interest of the masses."

Today, about 6% of Skype's subscribers are in China, according to the service provider. Company officials were not immediately available for comment to the news from China.

Skype users pay 0.19 yuan or 3 cents per minute to call a landline in the United States, compared with at least 2.4 yuan per minute using China Unicom, according to TMCnet.com.

Although the Chinese government is pursuing charges and proactively seeking out illegal services, the ministry's online information does not define these illegal services or provide a schedule for shutting them down. The online information does include a phone number where citizens can report violations.

In October 2009, the Chinese government closed the doors on UUCall, a local Skype-like company, on suspicion it was "operating illegal Web phone services." Reportedly, the company resumed operations in February after relocating its domain to Hong Kong, TMCnet.com said.

While Skype will, perhaps, see the biggest impact, there are hundreds of small, regional VoIP players in China that will be damaged by China's move, said Gordon G. Chang in Forbes.

"The biggest victim of the new rules, however, will be China itself. The Ministry, when it gets around to enforcing its regulations, will also target the hundred or so local providers that now offer Internet telephony without possessing the licenses to do so," he wrote in a blog. "Some of these operators may eventually get permits, but the regulators will nonetheless make sure that the three big telecom companies are, as in the past, insulated from competition."