China embracing 'illegal' VoIP calls

Almost 13 million people in China will be paying to use unlicensed local internet phone services within four years, new research predicts.

This greater than tenfold increase will come despite the services being illegal, according to analysts at In-Stat who believe that China's high phone charges are driving users to VoIP services. 

Paying customers of China's unlicensed 'virtual VoIP carriers' (VVCs) will increase from an estimated 1.23 million at the end of 2006, to 12.96 million by the end of 2011, forecasts China-based In-Stat analyst Kevin Li.

The VVCs mostly provide PC-to-phone services through their own gateways which connect the internet to the phone network.

"The Ministry of Information Industry has declared that broadband IP telephony services can be provided legally only by traditional service providers," said Li in new report on China's VoIP market

"VVCs are therefore operating illegally and have little phone number resources. Most subscribers can only make outgoing calls.

"However, due to intense competition among voice service providers, and VVCs' lower price compared with traditional long-distance calling or prepaid [internet phone card] services, VVCs are having success."

Meanwhile, legal VoIP services from China's licensed telecom carriers will increase from about 720,000 now to 9.53 million by the end of 2011, In-Stat predicts.

China's mobile and fixed line telecoms business is dominated by former state-run incumbents with limited competition and significant government interference, observers say.