Richard Zhao Liang and Bill Campbell.

Although the worldwide VoIP market is booming and Skype has wooed millions of users, its road to China is not so bright as in other parts of the world, especially for revenue.
There are four kinds of VoIP services: phone to phone, phone to PC, PC to phone, PC to PC. In China, the phone to phone and phone to PC are clearly defined in law as the basic telecom services that no one besides these six services providers can provide: China Mobile, China Telecom, China Netcom, China Unicom, China Railcom, and China Satellite Com.).

The Ministry of Information Industry (MII), according to the notification no. 413(2005) on July 18, will continue to ban commercial PC-phone VoIP services, except for a trial at four cities countrywide: two for China Telecom at South China (Shenzhen and ShangRao, Jiangxi Province), while two for China Netcom at North China (Changchun, Jilin Province and Tai’an, Shandong Province). During the service trial by Shenzhen Telecom (a subsidiary company of China Telecom), the price of VoIP phone is about 2.5 cents (US) for both domestic and international calls.

A joint venture with TOM Software will not help Skype generate revenue in China. Skype would require a joint-venture with China Telecom or China Netcom. But without clear commercial benefits to those two fixed line carriers such a joint venture is unlikely to occur.

Skype’s only source of revenue from mainland China will only be from SkypeIn and SkypeOut originating from outside of China. And none of that revenue will flow to Skype’s Partner TOM Software. So the marketing approaches shown below might be suitable for Skype into China:

First, continuously fight for an increasing market share at IM and PC to PC market, competing against QQ, MSN, YIM, Google Talk, Sina UC, and NetEase PP.
Second, cooperate with those smartphone/handset/pda hardware vendors for solutions like USB-plugable PC phones.

Skype’s competitive advantages come from its voice quality, encryption, and ease of use.

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