Forget your telephone and turn to the computer for long-distance calls with the free and easy Skype software. It was a trend among millions of Chinese netizens in recent months. But it’s still not realistic in principle due to policy restrictions.
　　“Sweden-based Skype Technologies S.A. plans to launch its SkypeOut VoIP (Voice over Internet Protocol) service in China and is holding talks with major operators, including China Telecom and China Network Communications (CNC), over market access,” a spokesman of TOM Online, Skype’s partner, said in mid-November.
　　
　　With SkypeOut, people can use a software application downloaded on their computers to call ordinary phone numbers all over the world at cheap local rates.
　　Under existing Chinese telecommunications regulations, however, only licensed operators are permitted to offer VoIP services. In practice, this has been interpreted that only operators are allowed to offer VoIP services used to call a telephone, while other services that allow VoIP calls from one computer to another have been tolerated.
　　Skype’s SkypeOut service is therefore not available in China. However, Chinese Skype users who download the overseas version of the software are still able to access the service, which allows users to make international calls at a fraction of the cost charged by operators.
　　VoIP, with its low cost and clear voice transmission, will be a trend for Chinese telecommunications companies, industry insiders say. Cooperation with virtual network operators will yield considerable profits for telecom operators. But it will also have an impact on the traditional telecom market.
　　According to statistics from BDA, a consulting company for China’s telecom and technology sectors, in the first half of 2005, VoIP service accounted for 3 percent of the total revenue of China’s telecom market. During the same period, revenue from long-distance calls totaled $1.81 billion, down 2.8 percent from $1.86 billion in the same period of 2004. Industry experts explain that long-distance calls are the second largest source of revenue for China Telecom, accounting for 18.2 percent of the total in the first half of 2005. The decline was mainly due to VoIP.
　　Skype co-founder and CEO Niklas Zennström said that while Skype is providing free computer-to-computer voice communication in China, it hasn’t directly promoted its pay service, SkypeOut, and there is no timetable for its presence here.
　　It was reported that domestic fixed-line operators blocked Skype several months ago. However, a spokesman for China Telecom refuted the accusation. “We’ve never been intent on blocking Skype. The reports were not true,” he said.
　　TOM Online Vice President Feng Jue revealed the company was hoping to cooperate with telecom operators soon on VoIP, so that Internet users can call ordinary telephone numbers through personal computers. “We hope to be able to launch the service with licenses on loan from telecom operators and share profits with them,” said Feng.
　　Whether or not SkypeOut can enter China as smoothly as Zennström expects, the attempt will be beneficial. Chen Jinqiao, an expert from the Ministry of Information Industry, said, “Integration of the telecom network and the Internet is in its final stage. It’s a crucial time for the business transformation of Chinese telecom operators.”
　　
　　COMPUTER-TO-TELEPHONE: Voice connection integrating the Internet and telephone network will make long-distance talks cheaper and easier
　　As VoIP is a non-traditional voice communication tool, service providers are not subject to routine pricing control measures. Zennström once said that Skype is unique in using the Internet as its medium, so that regulatory authorities cannot collect fees just as they cannot charge for e-mail or Web pages. This means that its cost will be lower than that of traditional telephones.
　　By using SkypeOut, Chinese Internet users can easily make calls to the United States or Europe. Many international voice communications are conducted through this software, and SkypeOut’s voice transmission is nearly as good as that of traditional telephones. An engineer at China Telecom said that SkypeOut is actually an IP telephone, which is realized through connections from IP to a traditional telephone network.
　　SkypeOut’s launch in China will surely bring competition in IP and international calls for China’s fixed operators. China still has no clear policy for the service integrating the Internet, gateway and fixed-line telephones, which provides opportunities for Skype.
　　Chinese telecom operators began promoting their own IP telephone services several years ago. But their prices are not cheap, with an international call costing 2.4-4.6 yuan ($0.30-$0.57) per minute depending on different destinations, plus an additional cost for using a local telephone network. In contrast, by using SkypeOut, the price is about 1 yuan ($0.12) per minute.
　　Li Kang, an analyst at China Labs Consulting Ltd., noted that in the United States, IP telephone services are provided by independent companies, while in China, it is offered by telecom operators. Different operators and technologies are responsible for the high cost of IP telephone services in China. He also predicted that the VoIP service represented by Skype “will pose a big challenge to the international business of China Telecom and CNC.”
　　The low cost has given momentum to VoIP’s expansion, which operators have already taken as an effective way of reducing the price of long-distance and international calls. It’s also considered a likely replacement of the current public switching telephone network. VoIP services are expected to occupy a large share of an overall value-added services market of $47 billion in 2009, accounting for $15.9 billion, in addition to the $43 billion that’s expected to be spent on broadband access in five years, Juniper Research said.
　　Talks With Skype
　　Skype provides services including computer-to-computer text and voice communication, as well as the pay service SkypeOut, which allows communication from computer to telephone, except emergency calls such as 911.
　　By downloading the Skype software and paying by credit card, people can call ordinary telephones in most countries through their computers. In China, the per-minute cost of using SkypeOut is far less than local operators’ charges for international calls.
　　
　　This telephone revolution with the Internet as its medium has found fertile soil in China. According to a report released by the China Internet Network Information Center, as of June 30, 2005, the number of Internet users in China reached 103 million, with 53 million having broadband access, both of which ranked second in the world after the United States.
　　“If Skype can develop smoothly in China, it’s possible for it to break up the monopoly of big operators and provide low-cost phone services, benefiting ordinary people,” said Zhang Ni, a Skype user.
　　According to TOM Online Vice President Feng, the number of Skype users in China has reached 3.4 million, with a daily growth of 170,000 to 190,000.
　　“If the PC-to-phone service of Skype can be promoted in China, it will involve the interests of operators, end providers, value-added service providers and end users,” said Chen at the Ministry of Information Industry, adding that telecom operators’ participation is of vital importance.
　　Experts familiar with the situation agree that VoIP, if allowed in China, will dominate the market soon, which will greatly affect local telecom companies that have profited from traditional telephone services. To compete with low-price Skype international calls, telecom companies will have to lower their prices. Thus, it’s foreseeable that the cost of international calls will drop.
　　The integration of the Internet and traditional telecom services is likely to bring new challenges.
　　Chen said, “If Skype can operate closely with domestic telecom operators and share profits with them in large proportions, the restriction on Skype can be eliminated. To follow the trend of development is a permanent solution.”

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