Independent VoIP in China is illegal

Charice Wang, Analyst and Jane Wang, Senior Analyst, Ovum

AUSTRALIA: One of concerns is that VOIP service is hurting telcos voice revenue. More than 70 percemt of the current Chinese telcos’ revenue is still coming from voice service.

To regulate VoIP is the way to protect telcos’ benefit. With a significant growth of VoIP services during recent years in Mainland China with many service providers, such as Skype and UUCall, MIIT quickly released a notice on 10 December 2010 on illegal VoIP services. The ministry has not given timetable on when measures will take effect.

The fast growth of VoIP traffic on the networks of three major operators is proven to be the main source of voice revenue of the state-owned operators (particularly international calls) and eats up a lot of bandwidth of the networks. If the measures are really enforced, the VoIP service providers, including Skype (via Tom Online) and others will be blocked out for a short time. Therefore, there will be negative impacts on Skype business as China is a huge market for VoIP services, even risking its plan for IPO.

Another concern is the three networks convergence is on trial in several cities and the State Council has targeted to implement complete convergence around 2013. This means that VoIP services will be difficult to be blocked out to other service providers under convergence environment. In the long term, we expect it will be difficult for the MIIT allow only three state-own operators to provide VoIP (PC-to-phone) services and protect benefits for telecom operators.

National security is also a major issue. Since all Chinese operations are state-owned companies, they have the responsibility of national telecommunication security to some extent. Phone call number through PC to Phone or PC to PC VoIP services is always difficult to track.