would reportedly slash up to 60 percent off people's long-distance telephone rates. Deidre Stark reports Government has outlawed super cheap overseas phone calls in Bermuda by threatening to press criminal charges against a company offering them.

After 18 months of "talks and meetings'' with Government and others in the industry, Internet service provider Logic Communications -- BTC's sister company -- launched their Logicphone service on July 23.

It slashed rates so drastically that in its first 60 hours more than 600 locals signed up for the service which sees a normal telephone used to gain access to far cheaper calls via the infrastructure of the Internet.

But despite having prior knowledge of Logic's plan which the company says would shave up to 60 percent off many people's monthly long-distance phone bills, Government moved on the same day as the planned launch to stop it.

Logic president Peter Durhager said he received a call from the office of Telecommunications Minister Renee Webb asking that the launch of the trial be put off until August.

He said he was willing to do that if they could give him a reason to do so, but they could not and since the launch was already underway he pushed ahead.

"This came at the last minute before the launch after the Minister has promised and promised and promised to allow us to offer this,'' he explained.

Within days Bermuda's solicitor general faxed the threat of criminal charges to Logic's headquarters.

But Mr. Durhager fears it was the result of pressure by Cable & Wireless which has profited from the bulk of long distance calls for many years, and enjoyed a monopoly until TeleBermuda entered the fray.

And last night Mr. Durhager was questioning what Government hoped to gain from quashing a telephone service which at last brought cheap rates to Bermuda, when they had publicly pushed for competition in the arena.

"I cannot for the life of me understand why or how this is bad for Bermuda.'' After agonising over the decision, Logic execs decided to withdraw the service on Sunday night, and not charge customers for the ten days of calls.

"We made that decision yesterday as a result of being told by the Government that we would be criminally prosecuted today if we did not stop providing the service,'' an exasperated Mr. Durhager said.

And while his lawyers were confident the company was not acting outside its licence, he said ultimately the charges could result in imprisonment, "all for bringing the price of long-distance phone calls down''.

"Putting this new efficient networking technology to work allows us to provide a hell of a lot more for a lot less. This is a natural innovative process.

"The Government is inhibiting innovation and progress by not dealing with the fundamental issue that technology has bypassed their regulatory environment.'' The cut-rate service used "value-added data packet switching'' which Logic's licence allowed, and was the basis for other services offered like video-conferencing, he said.

The voice is broken down into packages of data and transported via the Internet.

It is much cheaper since the packages of many different callers can be sent down one line at the same time, rather than the usual single caller per line.

But Mr. Durhager told The Royal Gazette Bermuda's Government could only lose from such a move since it was touting the Island as an e-commerce hub.

"And then in the next breath they are thwarting technology, actually trying to stop progress which would have improved service and cut prices for telecommunications which is exactly what e-commerce depends on,'' he said.

Govt. threatens Logic "The Minister was espousing the continued opening of the market just a few weeks ago, along with the importance of competition and choice for the customer in order to bring prices down. That is just what this service did.'' "Logic is a licensed carrier trying to bring real reductions in price and they're threatening criminal prosecution. How does that look to the rest of the world in terms of our seriousness about e-commerce?'' Last week Minister Webb slammed Logic for operating the service "outside the law''.

But she then admitted the Government was working towards allowing Bermudians to take advantage of such technology to make cheaper calls.

She said: "But the law has not been changed. There is no legal framework in place to take advantage of the new technology.'' Backed down: Logic president Peter Durhager