Now we see many articles headlined “Skype-Blocked in China” in newspapers and journals.

“Chinese government officials have been generally tolerant of VoIP software, such as Skype, that is used to make calls from one PC to another. But the ability of Skype users to make calls to a phone via the SkypeOut service is more sensitive, because this directly affects the revenue that operators such as China Telecom earn from international phone calls.”

This “blocking of Skype” is “bureaucratic politics” says Clark, managing director of BDA China

The game in China is all about revenue. It’s well known that Skype is different from Vonage, the latter is protected in the USA as a VoIP service provider following FCC regulations, while the former is not. Vonage pays for the network infrastructure it uses. Because Skype makes money from network infrastructure of other Telco companies without any revenue sharing or settlement mechanism. This does not play well in China.

In China, PC-to-Phone and Phone-to-Phone VoIP services are restricted to as “basic telecom service”, and only a few state run Telco companies are allowed to offer this service. Although foreign companies will get more penetration opportunities as the WTO deals helps to open the telecom market, but this is unlikely to benefit Skype, unless Skype succeeds in transforming itself into a more transparent and open technology, e.g. communication protocol, key management, billing data output, interoperability with SIP.

It’s obvious that Skype is a killer technology. It provides voice and video services at a very lower cost. (of course, not zero like what Skype spend on their services). It’s the responsibility of the Ministry of Information Industry (MII) to represent consumers to force the service providers to make use of advanced technologies at the possibly earliest time (if they won’t, new licenses will be issued to other providers). But, as to China Telecom, China Netcom, and other service providers, they won’t give up their monopoly privileges currently have unless they are forced to. So “blocking Skype at China” is only a short term ploy by the Telecoms as they prepare themselves for the uncertainty of the future regulations.

The differences between PC and “Phone” are becoming more and more obscure, so it will be more and more difficult to distinguish “PC to PC“ against “PC to Phone”. That’s why I suggest Skype’s road to China lies at penetrating into those handheld devices with WiMax, WiFi, GRPS, 3G wireless link.

30 minute News Flash: Two articles about Skype making progress in talks with China. Thanks to my Skype buddy Gary Weir in Collierville, TN.

UK PRESS: Skype In Talks To Launch Service In China

Skype optimisic of launching computer-to-telephone call ops in China - report