Skype May See Restrictions in China

The Chinese government is preparing to block access to Skype’s popular
Internet telephone service that has been undercutting the country’s telecom
business, according to the Shanghai Daily online newspaper.

China Telecom, the nation’s largest fixed-line phone carrier, is already
blocking access to service in the southern province of Shenzhen, but is
expected to expand the ban nationally, according to the paper.

The Shenzhen branch of the telecom is said to have instituted fines for
users if they are caught operating Skype or other VoIP products.

The government is also said to be preparing to take the lead in limiting the
VoIP software that allows people to make calls through computer terminals,
according to the paper.

A spokesperson for the Luxembourg-based Skype told internetnews.com that the
company was currently looking in to the matter.

Meanwhile, a China Telecom spokesperson said the company is waiting for
upper management to present a roadmap nationally.

“Whether to ban the software should be decided by our superior authority and
so far we haven’t received such a notification,” Zheng Jianping, a Shanghai
Telecom’s spokesman, told the Shanghai Daily yesterday.

Under the current laws and regulations in China, PC-to-phone services are
strictly regulated and only China Telecom and China Netcom are permitted to
experiment with VoIP, the spokesperson told the newspaper.

China has a tradition of blocking access to Web sites based on politically
sensitive subjects. Such was the case in June when Microsoft caved from
government pressure and agreed to abide by censors banning the words “freedom” and “democracy” on its Chinese internet portal, MSN China.

However, the Skype case appears to be strictly a matter of economics, since Internet-based calls are much cheaper than landline calls.

It is not clear with the ban will have an impact on Skype’s rumored talks with auction giant eBay , which is said to be in negotiations to buy the company. Neither company would comment on those rumored talks.