Red Herring reports:

The Shenzhen branch of China Telecom, China’s largest telecommunications carrier, has begun blocking VoIP calls in a possible effort to stanch the massive loss of revenue it could sustain if a substantial percentage of that country’s 100 million Internet users switch their long-distance calling to services like Skype.

Reuters cited media reports and Internet postings as the source of its information that the Shenzhen branch of the former monopoly carrier has begun blocking Internet users from accessing Skype’s voice services within that city.

The news service also cites a report in the Shanghai Daily that China Telecom plans to block Skype’s service throughout the country, eventually. However, there was no confirmation of that unattributed report.

News reports said the carrier, which owns a large broadband network and controls a large network of ISPs, has created a “blacklist” of Skype users in Shenzhen and threatened punitive action against those who try to circumvent the carrier’s Skype blocks.

‘It’s condescending on our part to somehow enforce some kind of VoIP bill of rights on the Chinese.’
-Tom Nolle,
CIMI

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But is the blocking solely about slowing the drain on the carrier’s revenue, or are there national security issues that concern the Chinese government?

VoIP and National Security
China Telecom and its largest rival, China Netcom, do not offer VoIP services.

“VoIP is actually not allowed in China, but there are a lot of people in China who use Skype,” said Jesse Parker, managing director of Adventis China. “I have attended business meetings in China that have used Skype’s conference-calling capabilities. They need an international credit card to buy those minutes, or they would have someone else buy minutes for them.”

Skype allows users around the world to use the PC to make calls for free or at drastically discounted rates.

“All of China Telecom’s profits come from fixed wireless,” said Mr. Parker. “Its fixed-line business is not profitable, so they have a motive to slow down the inevitable damage caused by Skype.”

According to Mr. Parker, it would be very difficult for China Telecom to effectively block Skype in China. It is no longer a monopoly, so its blocks will only affect people who subscribe to its DSL services.

“This would only be effective if the ministry decided to block Skype usage across the country. That is unlikely. The government would not like the message that this sends to businesses across the globe,” said Mr. Parker.

‘Bad Message’
“Every Internet company such as Yahoo or eBay will be sent a bad message about China’s control of the eBusiness sector,” he added.

But Tom Nolle, president of CIMI, a Voorhees, New Jersey, technology assessment firm, believes that China Telecom or the Chinese government has the right to block Skype, if it so chooses.

“There is no inalienable right to Skype in China, or anywhere else. We in the U.S. are struggling with issues of national security as it pertains to VoIP,” said Mr. Nolle. “It’s condescending on our part to somehow enforce some kind of VoIP bill of rights on the Chinese. The Internet is not above the law or beyond regulation.”