China maintains control of Internet phone services

Asian Economic News, Feb 8, 1999

BEIJING, Feb. 4 Kyodo China's Information Industry Ministry indicated Thursday that it will strictly control the spread of private Internet phone services even as it breaks up the country's telephone monopoly. Zhang Chunjiang, director of the ministry's Telecommunications Administrative Bureau, said the ministry will crack down on the illegal operation of Internet-based telephone services, which are tantamount to "information smuggling." Zhang said the ministry has allowed a few telecommunications companies to start trial projects providing Internet telephony, in which people's voices are transformed into computer data and sent across Internet lines.

An appeals court in the southern coastal city of Fuzhou recently found in favor of two brothers who used the Internet to offer cheap international calls to customers. Police had accused them of "endangering national security." Zhang said charges for international calls, telephone line installation and Internet services will be reduced this year. The central government is presently considering an Information Industry Ministry proposal to break up China Telecom, which holds 95 % of China's telephone market, into three companies, the official Xinhua News Agency reported Thursday. China Telecom has come under fire for its expensive Internet service charges and international phone fees, calculated by telephone service sources to be six times higher than equivalent calls made from the United States. On average, Internet users in Beijing use 35% of their monthly salaries to pay Internet fees while the equivalent for U.S. users is 1%, the official China Daily newspaper reported Thursday. China Telecom's monopoly of Internet services is causing financial difficulties for the private Internet service provider (ISP) companies which have sprung up during the past couple of years to cater to the growing number of Chinese Internet users, presently estimated at 2.1 million. About 85% of the ISP companies' income is used to pay China Telecom for the use of the Internet lines, telephone service sources said. The Chinese government is wary of the influence of "inappropriate" ideas sourced via the Internet outside China's tightly controlled media. Last month, Shanghai software entrepreneur Lin Hai was sentenced to two years' imprisonment in China's first conviction in an Internet-related political crime case. Lin was sentenced on subversion charges for providing the e-mail addresses of 30,000 computer users to a pro-democracy Internet journal produced by overseas dissidents.