Telecommunications Minister Renee Webb has predicted an Internet price war after Cable and Wireless introduced a lower-priced business package.

The move follows the recent decision to let Cable and Wireless and TeleBermuda International (TBI) compete with local Internet firms North Rock and Logic for businesses customers.

Now the Telecommunications Commission must decide whether to let Cable and Wireless and TBI go after the residential market.

Ms Webb said a decision will be made by the end of the year.

"We will see how this plays out.'' Ms Webb said: "We will look at it from the objectives of the Country and the implications.

"Clearly we don't want to put the local carriers out of business.'' Ms. Webb said she hoped the local firms would continue to accept the challenge of lower prices.

"We are encouraging them to look at other business models. We are trying to have real competition rather than a monopoly or a duopoly.'' She said North Rock had recently been given permission to operate a local phone service.

Ms Webb said yesterday's price fall was welcome.

"It shows competition is working,'' she said. "One complaint we always had about telecommunications over the last year and a half was that although phone costs have come down there has not been a significant reduction in costs of Internet access.'' She said this was frightening off firms wanting to take advantage of Bermuda as an e-commerce jurisdiction.

"We are basically in the top tier of expensive rates. We are sitting right next to the United States so it can be difficult when you know how cheap it is there.

"I am sure TBI will respond.'' Cable and Wireless said their new business Internet service is the most cost effective in Bermuda.

It is aimed at serving small, medium and home-based businesses. Unlimited access is available for $99 a month.

The SoHoConnect service will offer three Internet packages: $30 per month for 30 hours; $50 per month for 50 hours; and $99 per month for unlimited Internet access.

Cable and Wireless spokeswoman Charmaine Burgess said: "SoHoConnect is the most cost effective Internet service in Bermuda.

"We are the first to offer unlimited access to both Bermuda and the Caribbean region.'' Customers can pay by credit card over the Internet.

Competition: Renee Webb