This excerpt taken from the SOHU 10-K filed Mar 25, 2005.
Mobile Internet Services
Beijing Sohu, Sohu Internet and Goodfeels business activities include the provision of online services related to mobile Internet services, including SMS, MMS, WAP and IVR.
On April 25, 2004, the MII issued a notice stating that mobile network carriers can only provide mobile network access to those mobile Internet service providers which have obtained licenses from the relevant local arm of the MII before conducting operations, and that such carriers must terminate mobile network access for those providers who have not secured the required licenses within a 30-day grace period. On the basis of the said notice, China Mobile Communication Corporation, or CMCC, has required each of its mobile Internet service providers to first obtain a license for trans-regional value-added telecommunications services in order to gain full access to its mobile network, which is a nationwide policy in line with a similar notice issued by the Beijing branch of CMCC on April 12, 2004.
On August 13, 2004, we announced the temporary suspension of CMCCs distribution of MMS for four service providers, including Sohu. These services were suspended for one year effective September 1, 2004.
In August 2004, certain local network operators also informed us that the maximum short messaging service fees should be reduced to RMB 15 per month (from RMB 30 previously) and RMB 1 per message (from RMB 2 previously) effective from August 1, 2004. We are not able to predict whether these new billing rates will be adopted nationwide in the future.
On August 18, 2004, Sohu Internet was granted the license to provide trans-regional value-added telecommunication services.
We are applying for a license for Goodfeel to be allowed to provide trans-regional value-added telecommunications services.
In addition, on January 27, 2005, the SARFT issued a notice prohibiting the broadcasting of television advertisements regarding SMS-based services that use fortune telling or horoscope-related information as content. We are aware of the potential regulatory risk that may be incurred by similar notices in the future that may ban certain types of content found by the PRC government to be objectionable.