It was reported that domestic fixed-line operators blocked Skype several months ago. However, a spokesman for China Telecom refuted the accusation. "We've never been intent on blocking Skype. The reports were not true," he said.

TOM Online Vice President Feng Jue revealed the company was hoping to cooperate with telecom operators soon on VoIP, so that Internet users can call ordinary telephone numbers through personal computers. "We hope to be able to launch the service with licenses on loan from telecom operators and share profits with them," said Feng.

Whether or not SkypeOut can enter China as smoothly as Zennström expects, the attempt will be beneficial. Chen Jinqiao, an expert from the Ministry of Information Industry, said, "Integration of the telecom network and the Internet is in its final stage. It's a crucial time for the business transformation of Chinese telecom operators."

As VoIP is a non-traditional voice communication tool, service providers are not subject to routine pricing control measures. Zennström once said that Skype is unique in using the Internet as its medium, so that regulatory authorities cannot collect fees just as they cannot charge for e-mail or Web pages. This means that its cost will be lower than that of traditional telephones.

By using SkypeOut, Chinese Internet users can easily make calls to the United States or Europe. Many international voice communications are conducted through this software, and SkypeOut's voice transmission is nearly as good as that of traditional telephones. An engineer at China Telecom said that SkypeOut is actually an IP telephone, which is realized through connections from IP to a traditional telephone network.

SkypeOut's launch in China will surely bring competition in IP and international calls for China's fixed operators. China still has no clear policy for the service integrating the Internet, gateway and fixed-line telephones, which provides opportunities for Skype.

Chinese telecom operators began promoting their own IP telephone services several years ago. But their prices are not cheap, with an international call costing 2.4-4.6 yuan ($0.30-$0.57) per minute depending on different destinations, plus an additional cost for using a local telephone network. In contrast, by using SkypeOut, the price is about 1 yuan ($0.12) per minute.

Li Kang, an analyst at China Labs Consulting Ltd., noted that in the United States, IP telephone services are provided by independent companies, while in China, it is offered by telecom operators. Different operators and technologies are responsible for the high cost of IP telephone services in China. He also predicted that the VoIP service represented by Skype "will pose a big challenge to the international business of China Telecom and CNC."

The low cost has given momentum to VoIP's expansion, which operators have already taken as an effective way of reducing the price of long-distance and international calls. It's also considered a likely replacement of the current public switching telephone network. VoIP services are expected to occupy a large share of an overall value-added services market of $47 billion in 2009, accounting for $15.9 billion, in addition to the $43 billion that's expected to be spent on broadband access in five years, Juniper Research said.