Skype still operating in China despite reports of ban

Skype and other VOIP companies say they are operating legally in China

Skype and other Internet phone services continue to operate in China days after media reports said the country's government was cracking down on them.

Skype is operating normally in China, a company spokeswoman said on Tuesday. Skype's Chinese partner, TOM Group, said, "The operation of Skype in China is compliant with local laws and regulations."

The company behind Alicall, a Chinese Internet phone service based in Hong Kong, also said its operations had been unaffected. Alicall is a legal service provided by a legitimate company, said an Alicall spokeswoman.

The reports of a crackdown stem from China's Ministry of Industry and Information Technology issuing a notice on Dec. 10 saying it was working to stop illegal VoIP (voice over Internet Protocol) services. Media outlets then reported the ministry had declared all Internet phone services to be illegal unless provided by one of the country's telecommunication operators.

However, it's unclear if and how this new level enforcement will affect companies such as Skype that are not even based in China. Ministry representatives were not available to comment on Tuesday and the Ministry has yet to publicly target any companies.

"It's wait and see," said Duncan Clark, chairman of BDA, a Beijing-based technology consultancy firm.

China could be cracking down as a way to protect the country's three state-owned telecom operators, Clark said. Skype has already cut into the operators' revenue streams by becoming popular among Chinese users who need a convenient way to phone overseas.

"To the Chinese telecom carriers, this is a direct loss," Clark said. "Anything that seems to infringe on the telecom carriers' interests from the private sector is likely to see a reaction."

China has a history of blocking popular Internet sites, often for hosting politically sensitive content. YouTube, Facebook and Twitter are all inaccessible from within the country.

"They've shown their ability block a lot of stuff. But this hits a lot of people," Clark said. "Are they going to protect the incumbents or are they going to help consumers? It's a political calculation. Do they have the firepower to start interrupting traffic?"

Media reports named China Telecom as one of three operators allowed to offer Internet phone service in the country. China Telecom will "actively work with the ministry in cracking down on illegal VoIP business," said a company spokesman.

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