Bermuda businessman Richard Woolnough has had to back off on a service that he recently brought to market enabling local residents to slash long distance telephone rates.

Mr. Woolnough will no longer be able to offer a bundle of services he recently launched to help people use the Internet to make cheap telephone calls overseas, after Government's Telecommunications Department stepped in to say he would need a license to continue.

The development comes after Mr. Woolnough recently launched a website (www.buzz.bm) for the sale of handsets and the software to be able to use a technology called Voice Over Internet Protocol (VOIP). This allows users to make calls - at a significant savings - via the Internet to both landline and mobile telephone numbers around the globe.

As the service is one already available to any Internet user, Mr. Woolnough decided to sell handsets (much like a telephone receiver except it connects to a computer), the software and also to offer his technical know-how for those needing help setting up the service.

But wind of the new venture - a sideline to the technology business Mr. Woolnough runs, Bespoke Solutions - prompted a flurry of complaints to the Ministry of Telecommunications which then contacted Mr. Woolnough to say he would require a license to offer the service.

Yesterday Telecommunications Director William Francis told The Royal Gazette: “I can clarify that any entity that offers a public telecommunication service should have a license.”

Mr. Francis said that the department had been in contact with Mr. Woolnough on the matter.

Mr. Woolnough said: “Basically I'm not going to (any longer) offer a bundled service, but I will continue selling the handsets.”

With the VOIP technology, calling overseas can cost as little as four cents a minute - a more than 75 percent reduction on long distance rates from local providers which currently cost from around 16 cents and up.