China Bans Skype

Contributed by James (Yuqi) Liu

In the last month of 2010, the Chinese government unexpectedly announced Skype illegal in China. Skype Limited is the Luxemburg-based company that develops and operates the VoIP software Skype, allowing users to make computer-to-computer phone and video calls, and most importantly, computer-to-land line calls.

Since entering the Chinese market in 2007, Skype has maintained a fairly good relationship with the government. For example, it offered to filter out the sensitive words within its chat function as the government intended. It was partly because of this fact that when the Chinese government drove out Facebook, Twitter, Youtube, and in the first half of 2010, Google. Skype survived.

However, things changed. Starting from 2000, IP phones started to get in the market, which significantly harmed the potential profitability of the monopolistic telecom firm in China then: China Telecom. Chinese government soon announced IP phones illegal, even after the split of China Telecom into four oligarchic firms. Despite the government’s regulation, many family simply ignored the laws and installed IP phones, with per minute cost only 5%-10% that of normal phones.

Skype, on the other hand, didn’t begin their business in China as IP phone provider. Most users simply used the online video call function to make phone calls with relatives abroad. But it’s convenient IP call function soon attracted the attentions of IP phone providers. They assigned their users a Skype phone number and install an IP phone for them. Then, users could enjoy the cheap Skype phone calls.

Observing the increasingly stronger IP phone market, the only thing left for the government to do it to ban computer-to-land phone calls offered by Skype. Computer-to-computer calls will still be available, but computer-to-land calls will be completely illegal, with the only previously legal Skype phone illegalized.

Of course, there is still a long way to go if the government wants to drive out IP phones, considering the strength of the underground market and difficulty in detecting the use of Skype or other IP phones. After all, the increasingly lower telephone fee has made the Chinese government move against the tide.