Forget your telephone and turn to the computer for long-distance calls with the free and easy Skype software. It was a trend among millions of Chinese netizens in recent months. But it's still not realistic in principle due to policy restrictions.

"Sweden-based Skype Technologies S.A. plans to launch its SkypeOut VoIP (Voice over Internet Protocol) service in China and is holding talks with major operators, including China Telecom and China Network Communications (CNC), over market access," a spokesman of TOM Online, Skype's partner, said in mid-November.

With SkypeOut, people can use a software application downloaded on their computers to call ordinary phone numbers all over the world at cheap local rates.

Under existing Chinese telecommunications regulations, however, only licensed operators are permitted to offer VoIP services. In practice, this has been interpreted that only operators are allowed to offer VoIP services used to call a telephone, while other services that allow VoIP calls from one computer to another have been tolerated.

Skype's SkypeOut service is therefore not available in China. However, Chinese Skype users who download the overseas version of the software are still able to access the service, which allows users to make international calls at a fraction of the cost charged by operators.

VoIP, with its low cost and clear voice transmission, will be a trend for Chinese telecommunications companies, industry insiders say. Cooperation with virtual network operators will yield considerable profits for telecom operators. But it will also have an impact on the traditional telecom market.

According to statistics from BDA, a consulting company for China's telecom and technology sectors, in the first half of 2005, VoIP service accounted for 3 percent of the total revenue of China's telecom market. During the same period, revenue from long-distance calls totaled $1.81 billion, down 2.8 percent from $1.86 billion in the same period of 2004. Industry experts explain that long-distance calls are the second largest source of revenue for China Telecom, accounting for 18.2 percent of the total in the first half of 2005. The decline was mainly due to VoIP.

Skype co-founder and CEO Niklas Zennström said that while Skype is providing free computer-to-computer voice communication in China, it hasn't directly promoted its pay service, SkypeOut, and there is no timetable for its presence here.