service cut off by Cable & Wireless, the giant communications firm.

Some users had bills for overseas calls cut by half after signing up for the rival service.

But C & W, who provide the Island's international phone links, say the new operation is "illegal and fraudulent'' and have pulled the plug on it.

Now the firm that runs the service, Global Access Bermuda, is taking legal action to unblock its calls.

GAB started a few months ago, offering savings of up to 60 percent on overseas calls. But on Tuesday afternoon, C & W decided to block the calls.

C & W marketing manager Mr. Cornell Fox said the action was taken mainly because his company believed the service was illegal, but also because it affected profits.

He declined to comment on how the dispute might be settled.

An official C & W statement said the company was barring access to GAB calls because lawyers had advised that the calls were illegal under a criminal code section dealing with misuse of the phone system.

Connecting the calls would also put C & W in contravention of two Acts of Parliament, the company said.

A GAB customer in Warwick, who asked not to be named, said his phone bills were slashed by at least half after he signed up.

"I was really outraged that my service was cut off,'' he said. "We're all very surprised and disappointed because the savings are excellent and the quality of the lines is just fabulous.'' The man, a non-fiction author who regularly calls publishers around the world, said he stood to save up to $7,000 a year with GAB.

GAB owner Mr. Michael Leverock said the service used a system run by a US company called Telegroup.

Customers called a New York number and then hung up without it being answered.

They would then be automatically called back and given a US dial tone. The charge to customers was a $65 start-up fee, which was waived during May.

"We figured Cable and Wireless would not be too pleased with us being around,'' he said.

"But we have taken legal advice and it's our opinion that we're not in breach of the criminal code.'' He said C & W claimed the first call by a GAB customer, to the New York number, defrauded them. But since C & W do not charge for a call that rings and isn't answered, this could not be the case, he said.

If C & W decided to charge GAB for unanswered calls it would have to charge everyone, he said.

He accused C & W of contravening the law by "discriminating amongst their customers''. It was up to the Telecommunications Ministry, not C & W, to decide who could save on overseas calls.

GAB customers who paid a start-up fee would be compensated, he added. The Bermuda Telephone Company's general manager, Mr. Ernest Pacheco, said it was not directly involved in the GAB dispute at the moment. But Telco had been affected by GAB's operations, he said.

Senator the Hon. Mike Winfield, Minister in charge of telecommunications, said he backed the principle of competition in the industry and cheaper calls.

He hoped the two companies could resolve the situation themselves.