China Makes VoiP Services A State Duopoly

China may skirt round a WTO challenge on its rare-earth exports, but a decision to protect its state-owned telecom companies from competition from VoiP providers such as Skype and UUCall seems to be on thiner ice.

The Ministry of Industry and Information Technology says that only the leading telecom companies — that would be state-owned China Telecom and China Unicom — have the right to offer services that link computers and telephones (via People’s Daily). There are no details of when the prohibition would come into effect or what punishments illegal VoiP providers face.

Inevitably, China is the world’s largest market for VoiP services, which are far cheaper than landline calls and are cutting into the state carriers’ duopoly profits. Shutting down the services won’t be easy. So MIIT’s announcement may be a warning to the VoiP providers not to grow too quickly, to give China Telecom and China Unicom time to find a way to live with them or smother them. Market force if not market forces.

 

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