VoIP services are eventually expected to become more mainstream in China, but current offerings are dominated by smaller virtual VoIP providers operating in regional markets, thanks to confusion and uncertainty about government regulations and loopholes that can be exploited.
According to a report from CCID Consulting, a research, consulting and IT outsourcing firm, the continued economic growth and advances in technology are leading telecom operators to grapple with a new challenge: how to utilize new technology to provide users with better and cheaper voice and broadband services.
CCID notes that VoIP services have started appearing within certain areas in China. So far, the largest impact from VoIP has been in diverting users from traditional long-distance telephone services. China Telecom alone has an estimated 800 million to 2 billion yuan diverted away each year by VoIP. CCID also says VoIP's impact likely will grow in the future. The firm notes that China Telecom and China Netcom are also piloting VoIP services in various localities in China, hoping the experience will provide the two large, dominant service providers a competitive advantage in areas of the country where they have a weak presence.
In an earlier report this year, research company In-Stat noted that relatively high long-distance calling rates in China helped VoIP gain traction, especially through IP card services and via smaller telecom carriers pushing ahead with IP broadband telephony. In-Stat estimated that the number of broadband VoIP subscribers served by telecom carriers would grow from 720,000 last year to 9.53 million by the end of 2011.
However, the firm went on to note that smaller virtual VoIP providers offering PC-to-voice services by deploying soft-switching systems on Internet and media gateways are gaining a strong foothold in China's VoIP market. According to In-Stat, this is occurring because the country's Ministry of Information Industry (MII) decided that traditional VoIP service could be provided legally only by traditional service providers. This has allowed the alternative VoIP providers to gain more than 1.2 million customers through 2006 by providing limited service. Subscribers can only make outgoing calls using their services because they cannot legally connect into the existing phone network. Still, the cost savings have proven alluring.
Underground VoIP
In its report CCID said that because of a lack of traditional telephone services, telecom operators in China have actively experimented with and piloted commercial use of VoIP services in specific niches. In May 2004, for example, China Railcom started to quietly promote 'broad phone' in some regions, according to CCID. It says that 'underground' VoIP call volume in China is growing at 30% annually.
Because VoIP involves rather high initial expenses (including a VoIP phone set, initial installation fee and rental), most ordinary families still cannot embrace it. As a result, most current users of mainstream VoIP in China are enterprises or customers accessing IP voice bars.
CCID says most VoIP operators in various localities are small companies. The larger telecom operators only provide backstage communication network support. There are now an estimated 1,000 such small VoIP 'virtual' companies, CCID notes.
CCID' s background on how VoIP services developed in China provides insight into its future growth prospects.
In 2005 the MII stipulated that with the exception of China Telecom and China Netcom, which can conduct commercial experiments with IP phones using the PC-phone mode in some regions, no other units or individuals can engage in the service.