China steps up crackdown on internet phone services

"We are carrying out with relevant authorities a campaign to crack down on illegal Voice over Internet Protocol phone services", the Ministry of Industry and Information Technology said in a circular posted online earlier this month.

In the brief notice, which did not offer details on the crackdown or a timetable for shutting down 'illegal' services, the ministry listed a telephone hotline for citizens to report any violations.

The ministry declined to comment immediately when asked for clarification of the policy by AFP on Thursday.

The Beijing Morning Post on Thursday however quoted vice-minister Xi Guohua as saying only state-owned major Chinese telecommunications operators were licenced to provide internet phone services linking telephones and computers.

Communications between computers (PC-to-PC) are open to all service providers, Xi said.

That means some PC-to-phone services provided by firms including Skype, which are popular in China due to their low rates as compared with the country's major telecoms firms, could be banned under the ministry's new rules.

For example, Skype users pay just 0.19 yuan (three cents) per minute to call a landline number in the United States, while the same call on China Unicom would cost at least 2.4 yuan per minute.

UUCall, a homegrown Skype-like service which calls itself "the first Chinese internet phone brand", was shut down in October 2009 on suspicion of operating illegal web phone services, the report said.

It resumed business in February after moving its domain name to Hong Kong, it added.

Critics have said the government move was meant to protect state-owned Chinese telecom operators, according to various domestic media reports.

Other reports said it may be aimed at stemming rampant phone scams under which thieves use web-based phone services to defraud consumers, changing the call origin number to pose as bankers, police or government officials.

Officials at Skype, which has 23 million users worldwide, were not immediately available to comment on the issue.