China telephony law targets Skype

The popular Internet telephone service Skype could be dealt a major setback in one of the world's largest markets as the Chinese government cracks down on what it called illegal Internet telephone providers.

A Chinese government circular from the powerful Ministry of Information and Industry Research called for a crackdown "on illegal voice over Internet Protocol telephone services" and said it was collecting evidence for legal cases against them. It did not name any phone companies.

The Chinese move appeared to be aimed at protecting three government-controlled phone carriers - China Telecom, China Unicom and China Mobile - that provide the bulk of China's telephone services.

China has been known to play hardball with foreign businesses. Afterwards a months-long standoff over censorship, China after all gave Google approval in July to keep operating its Chinese search page.

Skype, in part owned by Web retailer eBay, has been growing in popularity among Chinese users and businesses to make cheap or free international phone calls over the Internet.

The world live in China

"Near one in six people in the world live in China, and a great many of them rely on Skype to connect with families and friends, run businesses, and call people around the world," wrote Skype's Josh Silverman in an October blog post about Chinese privacy.

The Chinese circular, dated 10 December, did not say what amounted to illegal services and did not name any VoIP (Voice over Internet Protocol) providers it considered to be breaking the law.

The ministry

Representatives of the ministry and the ministry's office gathering information for the campaign did not answer telephone calls on Friday.

Representatives of China Telecom and China Unicom did not answer phone calls on Friday. A spokeswoman for China Mobile, reached in Beijing, referred calls to the firm's Hong Kong office. Attempts to reach the Hong Kong office were not successful.

VOIP calls allow users to make international calls for much less than commercial providers, or even for free if both parties are using VOIP. Many businesses that use VOIP services to cut down on their international telephone costs could lose access to the cheaper alternative.