Officials in China have vowed to crack down on unauthorised Internet telephone services.

The country's ministry of information industry said such services were costing it hundreds of millions of dollars and warned that they amounted to the smuggling of information.

The Internet draws mixed signals from the Chinese Government. It has praised it as a tool for economic growth but at the same time it has blocked politically sensitive Websites, increased controls on Internet cafes and recently jailed a man for providing a list of e-mail addresses to exiled dissidents.

A court case in south-eastern Fuzhou has highlighted official anxiety at the impact of the Net. Two brothers who offered an alternative to China's notoriously expensive international phone calls through the Internet found their business closed, their equipment confiscated and were accused of harming national security.

The men appealed against their arrests and to general surprise the court found in their favour, saying no relevant law existed at the time. Yet the brothers are still in detention while the authorities seek to have the ruling overturned.

"There are some illegal operators who have been colluding with foreign companies and have seriously eroded China's income from international telecommunications", said an official at the ministry of information industry.

"The figures are huge, several billion yuan so far. In fact this is information smuggling. These people are evading official controls and we're going to crack down very hard on them."

The spokesman said the authorities would respect the court's final ruling on the Fuzhou case. He also said that China would license a number of officially approved Internet phone services this year.

But the brothers' action has won support from unlikely quarters, including the official English-language newspaper, the China Daily.

An opinion piece said the Fuzhou court decision had been welcomed by local people, who were tired of the government's telephone monopoly and at the unreasonably high prices for international calls.

The state-run China Telecom currently controls 95% of the market.