China will institute a strict permit system to run Internet telephone services.

The ministry will issue a permit only after a company has completed a six-month trial period, during which it resolves any problems and formulates standards, said Xu Mutu, director of the Ministry of Information_s telecom bureau. The newspaper China Daily said the ministry had not yet given the green light to three domestic telecommunications companies all slated to take part in Internet phone trials in 25 Chinese cities. The ministry was still setting up new facilities and studying how to run the business, the newspaper quoted Xu as saying. Xu said the ministry would ban any companies illegally offering Internet phone services, which provide drastically cheaper international calls than regular service providers. In a landmark case in January, a court in the southeast province of Fujian ruled that a firm offering cut-rate global calls through the Internet was not violating China_s state-run telecommunications monopoly. The ministry has come under pressure recently to lower telephone rates by introducing competition and new technology, including services that use the Internet to slash international charges.