China's recent move to ban "illegal VoIP telephone services" from operating in its country isn't rattling Skype's China partner TOM Group, who said that its service is not violating any of the country's laws.
With Skype planning a $1 billion initial public offering, the TOM Group had to reassure potential investors that China's Ministry of Information and Industry Technology (MIIT) recent ban on outside VoIP providers won't push it out of one of the largest broadband and Internet markets.
"The operation of Skype in China is compliant with local laws and regulations," a TOM Group spokeswoman told Reuters on Tuesday. "Currently, it is business as usual while service provision stays normal."
At this point it's unclear whether or not the new mandate will have an effect on TOM Group. Other than saying that it was collecting evidence to build a case against potential violators, it has yet to name any specific companies.
This is not the first time Skype faced problems in China. In 2005, the VoIP provider couldn't operate in parts of China because the government put a ban on consumers making Internet phone calls. Only China Telecom and China Unicom were permitted to offer VoIP trials in two cities.
However, critics believe it will be difficult for the MIIT to enforce the rules and that that China's action is nothing more than a way to protect three government-controlled service providers--China Telecom, China Unicom and China Mobile. Similar to U.S. and Canadian wireline incumbent service providers, China's incumbent carriers also continue to see respective long-distance revenues erode as consumers and businesses adopt alternative services like Skype.
"It smacks of protectionism for Chinese telcos," Duncan Clark, chairman of BDA Consulting, a Beijing-based technology consultancy told Reuters. "That's something I think the government is sensitive to. Sometimes they put these trial balloons out there to see the reaction."
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