The Telecommunications Commission approved a bid by the Bermuda Telephone Company to cut long-distance rates -- and balance that with a hike in the cost of Island-only calls.

From today, the residential rates will increase by $2 to $16 and local calls will have a 15-cent surcharge for calls lasting more than an hour.

Rates for line rental will also go up -- to $3.75 for voice lines and to $4.50 for data lines.

But from January, Telco will decrease the long-distance subsidy by five cents a minute, a decrease which will be passed on to the customer.

Linda Oliver, Telco's vice-president in charge of Government relations, said: "The Commission appreciated the need for rate rebalancing because it moves rates closer to cost.

"More importantly, whole local service will cost more as BTC now decreases out long-distance subsidy, the average customer's total bill will be lower.'' Telco does not set long distance rates, but the firm stressed it initiated steps to reduce the cost of overseas calls.