Skype could be made illegal in China

The popular internet telephone service Skype could be dealt amajor setback in one of the world's largest markets as the Chinesegovernment cracks down on what it called illegal internet telephoneproviders.     A Chinese government circular from the powerful Ministry ofInformation and Industry Innovation called for a crackdown "onillegal VoIP (Voice over Internet Protocol) telephone services" andsaid it was collecting evidence for legal cases against them.

It did not name any phone companies.     Skype was nevertheless available in China today morning through its jointventure partner TOM Online.     Skype had not but been contacted by Chinese government officials, aSkype spokesman said today in the United States.     The timing of a ban in one of the world's fastest growing marketscould dampen investor enthusiasm for Skype as it prepares a 2011initial public offering.

The filing did not break out China's user numbers

The filing did not break out China's user numbers and a Skypespokesman in the United States said he did not know how manyChinese users it had.     No single country other than the United States represented morethan seven percent of Skype's average monthly user, according tothe filing.     The latest news is another setback afterwards Skype's global serviceoutage last week, which cast doubts on the reliability of theservice..     In 2005, Skype was blocked in parts of China as the governmentsought to ban phone calls made over the Internet.     Skype, in some cases owned by Web retailer eBay, has been growing inpopularity among Chinese users and businesses to make cheap or freeinternational phone calls over the internet.     "Near one in six people in the world live in China, and a greatmany of them rely on Skype to connect with families and friends,run businesses, and call people around the world," wrote Skype'sJosh Silverman in an October blog post about Chinese privacy.     The Chinese circular, dated Dec 10, did not say what amounted toillegal services and did not name any VoIP providers it consideredto be breaking the law.     Representatives of the ministry and the ministry's office gatheringinformation for the campaign did not answer telephone callstoday.     Representatives of China Telecom and China Unicom did not answerphone calls today.

Attempts to reach the Hong Kong office were notsuccessful.     VoIP calls allow users to make international calls for much lessthan commercial providers, or even for free if both parties areusing VoIP.

The cheaperalternative

Many businesses that use VoIP services to cut down on theirinternational telephone costs could lose access to the cheaperalternative.