TOM Online faces severe competitive and regulatory problems in China per reports compiled by Jirong Zhou. Jirong posted to his Zalbazone blog that TOM Online is not only far last in a three-way race for the Chinese IM market, but that major telecom operators are defending their own VoIP strategies (vaporware?) by blocking Skype.com and SkypeOut in major Chinese cities.

This is another example of telco incumbents aggressively defending their turf. Could Skype have picked a better partner, one with stronger guanxi, one better able to negotiate access to China's major markets and forge more alliances with China's regulators and incumbents? Right now they're walking away from SkypeOut revenue. How long until Chinese users get the same service as Skype users everywhere else?

The full article, including screenshots of the blockage and quotes from Tom.com CEO Wang Leilei follow...

From this post.

Cold Water

For Tom.com, third largest Portal in China
For Skype, world's largest VOIP player
For Tom Skype, their Joint Venture.

Just 3 days after Skype and TOM Online announced an exclusive joint venture (51% TOM Online, 49% Skype), there appeared a negative news on Sina's homepage, China's largest Portal. Telecom Operators are going to block Skype in ShenZheng, Shanghai, Beijing, GuangZhou. Red circled in the up picture.

I found the picture in Tom's Skype forum showing he is unable to login SkypeNet. A journalist from First Financial Daily reported his experience by calling China Telecom Shenzhen branches' 10000 service number. They said:

We detected that he used SkypeOut which is illegal to use. His number is in the black list. He must Guarantee not to use it any more. Or he will get the FINE.

Tom failed to land SkypeOut in June. And the Information Industry Department files that it is illegal to operate VOIP except the 6 Operators in China.

Within one year, TomSkype successfully get a 3.4M user group. It's an amazing rapid speed, however it still looks too slow, compared to Tencent's hundreds of Millions user group. Wang Leilei, Tom.com CEO, said,

"It's impossible to be profitable even if the 3.4M users are all using SkypeOut. So we are not going to seek opportunities to land Skypeout in the near future. The joint company is going to enrich user experiences with TomSkype."

Virtual Operators

Though it's illegal to offer VOIP Service, there are many operators making deals under the surface. Up to now only 263 got a pc to pc VOIP operating license.

Phone to Phone and PC to Phone are settled as basic Telecom service, only the 6 Operators has the legal identity to offer service. All other parties are designated as Virtual Operators. What's their fate?

[Posted by Jirong Zhou 2005-09-08 19:36:22. Mr. Zhou is business development and marketing director for Skype developer The Masters Team, maker of PowerGramo (coming into beta soon).]