China cracks down on Internet phone services

China has pledged to restrict Internet phone services - a move that could affect thousands of businesses and individuals making cheap calls via web-based communications companies such as Skype.

"We are carrying out with relevant authorities a campaign to crack down on illegal Voice over Internet Protocol phone services", the Ministry of Industry and Information Technology said in a circular posted online earlier this month.

In the brief notice, which did not offer details on the crackdown or a timetable for shutting down 'illegal' services, the ministry listed a telephone hotline for citizens to report any violations.

The ministry declined immediate comment when asked for clarification of the policy by AFP on Thursday.

The Beijing Morning Post on Thursday however quoted vice-minister Xi Guohua as saying only state-owned major Chinese telecommunications operators were licensed to provide Internet phone services linking telephones and computers.

Xi said communications between computers (PC-to-PC) remain open to all service providers in China, which has the world's biggest Internet population at 450 million.

That means some PC-to-phone services provided by firms including Skype, which are popular in China due to their low rates as compared with those of the country's major telecoms firms, could be banned under the ministry's new rules.

For example, Skype users pay just 0.19 yuan (three cents) per minute to call a landline number in the United States, while the same call on China Unicom would cost at least 2.4 yuan per minute.

UUCall, a homegrown Skype-like service which calls itself "the first Chinese Internet phone brand", was shut down in October 2009 on suspicion of operating illegal web phone services, the report said.

It resumed business in February after moving its domain name to Hong Kong, it added.

Xi said China Telecom and China Unicom had licences to provide PC-to-phone services in four cities on a trial basis. He added the government was considering an expansion of the programme.

Critics said the government move was meant to protect state-owned telecom operators, who are reluctant to promote the cheap service because it will marginalise their existing - lucrative - international call services.

"Overall this is to take further strong measures to protect the interests of state-owned monopolies," Kan Kaili, a professor at the Beijing University of Posts and Telecommunications, told AFP.

Such policies "clearly hurt consumers' interests and can easily spark public anger," he said.

On web portal Netease.com, users were already starting to complain, in comments posted under a report on the MIIT regulations.

"What benefits people is not legal. I really want to curse out loud," one angry user said.

The move may also be aimed at stemming phone scams under which thieves use web-based phone services to defraud consumers, changing the call origin number to pose as bankers, police or government officials, some Chinese reports said.

Kan speculated that the government also could be attempting to block VoIP services such as Skype that are difficult to monitor due to their high encryption levels.

Officials at Skype, which was founded in 2003 and now has 23 million users worldwide, were not immediately available to comment on the issue.

Skype - which channels voice, video and text conversations over the Internet - was hit by a major outage last week that left millions of users unable to use the service, due to technical problems.