Skype in China talks over new call service

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Skype, the internet telephony company owned by eBay, is in talks with Chinese state-owned operators that it is optimistic will clear the way for the launch of its computer-to-telephone call service in the world’s most populous telecoms market.

Niklas Zennström, Skype chief executive, waved aside suggestions that Verso Technologies, a US company, was close to selling an anti-Skype filtering system to a leading Chinese operator. Skype offers its free computer-to-computer telephony service to users in China, but does not directly market its fee-paying “SkypeOut” computer-to-telephone service because of regulatory restrictions.

“We have quite a good relationship with the operators here in China and are in dialogue with them,” Mr Zennström said during a visit to Beijing. “I am optimistic that we will be able to launch the SkypeOut service in China.”

Mr Zennström declined to forecast when Skype would be able to introduce the SkypeOut service, which allows users to make calls around the world at a fraction of the price charged by traditional operators. However, his comments were the most direct response by Skype to the announcement last week by Atlanta-based Verso that it was marketing a Skype-blocking system to an un-identified Chinese “tier-one carrier”. Verso’s announcement fuelled speculation that Chinese state-owned operators would seek to block cut-rate telephone services based on “voice over internet protocol”, or VoIP.

But Mr Zennström said Skype had found no Chinese operator that was using or reviewing Verso’s product and suggested the US company had played a “smart PR trick”. “I don’t think they really have a product. I think it’s much more of a PowerPoint, press release, ‘vapourware’ thing.” rather than a real product.” he said.

Responding to Mr Zennström’s comments. Verso stood by its claim to have sold Skype-blocking technology to a large Chinese telecoms carrier on a trial basis. “No tier-one carrier is going to go into a trial like this based on a PowerPoint presentation,” said John O’Reilly, Verso’s vice-president of sales. “It is a real product. We are selling it today.”

Mr O’Reilly said there was legitimate demand in China and elsewhere for anti-Skype filters because of security concerns surrounding the internet telephony service.

“This is not something we have just come up with in the month of September. This is something we have been working on for more than a year.”

One issue in Skype’s negotiations with Chinese operators is the difficulty of monitoring calls made using encrypted internet technology. Chinese authorities routinely tap domestic telephone lines as part of efforts to suppress any challenge to the Communist party.

“Of course you need to make sure that users’ privacy is protected and at the same time that you comply with local laws and regulations,” Mr Zennström said. “Those are the kind of things that are being reviewed.”

Skype’s service has been disrupted in recent months by a local arm of China Telecom, the biggest fixed-line telecoms operator, in the southern city of Shenzhen. Employees of the local network have told local subscribers that services such as SkypeOut are illegal.

However, Elaine Feng, executive vice president of Tom Online, Skype’s joint venture partner in China, said it appeared the Shenzhen network had been targeting all forms of “peer-to-peer” traffic, not Skype in particular.

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