The Bermuda Telephone Company is asking to increase domestic telephone rates to compensate for revenue losses incurred on long distance calls.

The Telecommunications Commission recommended that Bermuda's interconnect rate -- the fee paid to BTC when a call is made to or from Bermuda overseas -- should be lowered following a recommendation from the US Federal Communications Commission.

The FCC has been trying to reduce interconnect charges globally for the past two years. Improvements in technology mean US interconnect rates have fallen dramatically. High rates elsewhere in the world meant that telephone service providers were routing calls through the US unnecessarily. When payment for these calls was made, a very substantial imbalance was caused amounting to a drain on the US balance of payments of some $4 billion a year.

Consequently the FCC advised US companies not to pay interconnect charges which are higher than rates they have recommended for each country. The rate is determined by the volume of calls in and out of a country and also the wealth of that country.

Bermuda and many Caribbean countries are in the same FCC rate band, which involves a 15 cent interconnect charge.

The Telecommunications Commission was asked to study the issue and last month recommended that Bermuda's interconnect rate be lowered to the level suggested by the FCC.

"Failing to agree to the FCC's suggestions would be likely to cost any country involved a great deal of time, effort and money in a legal battle which would have a limited chance of success,'' a Government spokesman said.

That recommendation was accepted by Telecommunications Minister Renee Webb.

But in order to compensate for any rate reduction for overseas calls, BTC argues that charges for local services will have to be raised. And if the revenue shortfall cannot be made up, redundancies could result.