Beijing crackdown on internet phone calls alarms operators

PUBLISHED : Thursday, 30 December, 2010, 12:00am
UPDATED : Thursday, 30 December, 2010, 12:00am

Beijing appears to be cracking down on internet phone services, a move that could affect hundreds of thousands of businesses.

The Ministry of Industry and Information Technology is soliciting public help to clamp down on what it calls illegal internet phone services.

'Currently, our ministry is working with relevant departments to focus on the crackdown on illegal VoIP [voice over internet protocol calls] and we are now appealing to the public for clues for illegal VoIP cases,' it said in a recent circular.

It said a hotline had been set up to collect reports from the public, but did not give details about what action the government would take.

It could affect hundreds of thousands of VoIP users and businesses on the mainland.

A ministry official and two professors from the Beijing University of Posts and Telecommunications said all VoIP services without a licence for basic telecommunications services - which have only been granted to the three big state-owned telecoms firms - are illegal. VoIP calls are popular because they are a lot cheaper than calls made via the big telecoms firms.

VoIP services allow people to call from their computers to fixed-line telephones or mobile phones, with the call transmitted via the internet rather than the telephone network.

A ministry hotline official said yesterday VoIP services may only be provided by China Mobile, China Telecom and China Unicom.

Professor Kan Kaili, an advocate of VoIP development from the Beijing University of Posts and Telecommunications, said all other service providers were illegal if the authorities strictly adhered to the telecommunications regulations.

Small service providers have mushroomed in recent years, with up to 100 believed to be catering to the huge market demand in what is a grey area. Many have obtained a licence for added-value telecommunication services, which do not cover VoIP, while some simply operate without a licence.

But Kan said the circular was a signal that the authorities wanted to tackle the loophole.

'My understanding [of the circular] is the ministry is targeting all the VoIP companies except for the three domestic operators,' Kan said. 'That makes China the only country in the world that bans VoIP services.

'It's outrageous and ridiculous.'

Professor Liu Deliang, from the same university, said: 'They want to curb the VoIP companies to protect the state-owned operators. But I disagree. The move is not about the rules and regulations. It's about the state companies' interests.'

The impact on dominant internet phone companies such as Skype, UUCall and Alicall remains unclear.

Spokesmen for Skype, which has teamed up with Hong Kong-listed Tom Group to offer internet phone services to Chinese customers, were not available for comment yesterday.

A Skype hotline operator said he was unaware of the circular. The mainland has at least 20 million users of VoIP services, analysts say.

Kan said the increasing popularity of broadband phone services would eat into the businesses of the three domestic operators, whose revenue from phone calls accounts for more than 70 per cent of total earnings. '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 interests of the masses.'

Another internet expert, Wu Chunyong , said: 'It is certainly a measure to protect the interests of the big three.' Wu said the three state operators had noticed the huge business potential and begun trial VoIP services in some areas.

A phone call via Skype's VoIP service to the United States costs 19 fen (22 HK cents) a minute, compared to the eight yuan a minute charged by China Telecom.

Rampant telephone fraud is a key reason the government is stepping up control. Some cases involve tens of millions of yuan and there have been mounting calls in the state media for better regulation of VoIP calls because users can easily hide their telephone numbers.

'We don't see the point of a wide-ranging ban,' an Alicall executive said. 'What we need to do is to closely monitor the users to help the authorities crack down on the crimes.'

But a small VoIP operator in a major coastal city said security concerns were another reason.

He said control had been stepped up after the riots in Xinjiang in July last year and many small VoIP operators had suffered months of interruption before controls were loosened again.

'The authorities found that they had failed to monitor some overseas calls based on VoIP technology and those calls were allegedly related to the riots in Xinjiang,' he said. 'Then the telecom operator we co-operated with told us that they were asked to stop offering connections to small VoIP service providers like us.'

VoIP transmission technology is also found in popular software including Skype, MSN and Google Talk, in which users can conduct chats and video conferences between two computers for free. Apart from computer-to-computer chat, it is also possible for a user to call a mainland phone number via the internet if they subscribe to internet phone call services operated by numerous telecoms firms.

Hong Kong Information Technology Federation president Francis Fong Po-kiu says a ban on 'unregulated' VoIP would bring a huge impact to both businesses and citizens as the technology has been widely adopted in the past 20 years.

The various kinds of VoIP services could continue if providers signed deals with authorised telecommunications companies, he said, but it remained unclear which services were approved by the authorities.

In any case, users would have fewer choices and could have to pay more for such services, he added.

Kan said the VoIP phone calls from overseas, including Hong Kong, may not be affected since the regulator would not be entitled to 'regulate the world outside the mainland'.

'The internet is a global technology and phenomenon,' Liu said. 'The move to ban the use of VoIP in China is to reverse the trend of global technological innovations.'

'Unfortunately, they appear sloppy and unwilling to develop the businesses,' said a Shanghai telecoms operator. 'Without the existing VoIP service providers, the business would never have taken off.'

Additional reporting by Priscilla Jiao