TELECOM Digest OnLine - Sorted: China Telecom Said to Block Skype

China Telecom Said to Block Skype

Doug Young (
Fri, 9 Sep 2005 10:03:21 -0500

China Telecom has started blocking access to a popular Internet
telephone service that is threatening its long-distance revenue,
according to local media reports and Internet postings.

China's largest fixed-line phone carrier recently began blocking
access to service from Skype Technologies SA, a European-based
Internet telecoms services provider, in the affluent southern city of
Shenzhen near Hong Kong, according to the reports, including one in
the Shanghai Daily.

They said China Telecom, whose broadband Internet service allows
access to Skype, has plans to eventually block the service throughout
its coverage area nationwide.

They also said the carrier has created a "black list" of people who
use the service in Shenzhen, and threatened to fine anyone who tries
to get around the new obstacles.

A China Telecom spokesman had no comment on the reports about the
Shenzhen blockage, but gave a broader view.

"Under the current relevant laws and regulations of China, PC-to-phone
services are strictly regulated and only China Telecom and (the
nation's other fixed-line carrier) China Netcom are permitted to carry
out some trials on a very limited basis," he said.

Skype service, which allows people to make calls from their PCs to
regular phones, enables subscribers in China to dial to major Western
markets in the United States and Europe for as little as 2 eurocents
per minute (2.5 U.S. cents), compared with rates closer to $1 per
minute from China Telecom.

China routinely blocks access to Web sites on politically sensitive
subjects such as the banned Falun Gong spiritual movement and the 1989
crackdown at Tiananmen Square that left hundreds dead. But blockage of
sites for purely economic reasons is much less common.

Tom Online, a Beijing-based provider of wireless value-added services
that has a year-old relationship with Skype for Internet instant
messaging services, said its product in China was still operational.


The Internet telephony blockage was a hot topic on several Web forums
hosted by Skype.

"The whole thing looks to me like a plot to make back the money China
Telecom thinks they lose because of Skype," complained one user in
Shenzhen, who said his access was blocked but his wife, also in
Shenzhen, was able to access the system.

Other users in Shanghai said they were still able to access the

Long distance business is an important revenue source for both China
Telecom and China Netcom, accounting for about 20 percent of China
Telecom's total revenue last year.

Internet-based services like Skype are putting pressure on both
companies to lower their long-distance tariffs, which have been coming
down at a rate of about 12-15 percent annually in recent years, said
BOC International analyst Alan Ng.

"Eventually (Internet-based phone services) will be a threat," he
said. "Whether it's already a serious threat, I doubt it. But it will
get even more popular, and certainly that is why China Telecom is very

U.S. Web auction giant EBay Inc. is currently in talks to buy Skype, a
source familiar with the situation told Reuters on Thursday, amid
concerns that the European company could crimp highly-profitable
eBay's growth.

China Telecom shares were down 0.88 percent at HK$2.80 in Hong Kong on
Friday. They are unchanged since the beginning of the year, trailing a
6 percent gain for the broader Hang Seng Index.

Investors are fretting about China Telecom's slowing growth, as they
wait for the outcome of a highly anticipated industry restructuring
expected to include the eventual awarding of third-generation (3G)
mobile licenses.

Copyright 2005 Reuters Limited.

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