of Bermuda's newest, and most fierce, competition wars.

At stake is the money to be made out of supplying in-house background music, or "muzak'' as it has become known.

Until not so long ago, Bermuda Broadcasting Company had a monopoly on the service and, with the help of electronics businessman Mr. Barry Kayes , provided music to several businesses on the Island.

But, in 1990, Mr. Kayes set up a rival service and there has been little love lost between the two parties in the ensuing scrap for business in a potentially lucrative industry, where background music services can cost from between $50 and hundreds of dollars per month.

Bermuda Broadcasting sent a letter to its customers in May saying that "other organisations'' were trying to lure them away from the company by using underhand tactics. BBC clients were being "misinformed'' about whose duty it was to pay copyright fees for music played in public, the letter stated.

BBC freely admits that the "other organisations'' is a thinly disguised reference to Mr. Kayes' Electronic Services, which has managed to snap up about 40 customers since it set up in 1990.

Bermuda Broadcasting urges its clients not to switch over to the new firm and tells them that the rival service costs twice as much, a claim which Mr. Kayes is willing to admit.

Mr. Kayes, though, says the quality of his music is superior because it is beamed over from the US by satellite and is not copied from cassette tapes, as happens at BBC.

He claims that the BBC service, while he worked on it, was subject to many complaints about the music being too boring, cassettes sticking and poor sound quality.

But, more seriously, he alleges that one of the reasons that BBC charges less for its service is that it may not be paying all the necessary copyright fees.

"I am paying fees to the Performing Rights, the Copyright Protection Society, the Musicians' Federation and the Mechanical Copyright Society,'' he told Business Diary . "They collectively represent composers, record makers, musicians and the record industry.'' Between one-third and half of his gross revenues go to these bodies, he says, eating into his bottom line and forcing up prices.

Bermuda Broadcasting, on the other hand, he claims pays copyright fees only to the Performing Rights, which looks after the interests of composers. "It's my understanding that they are in contravention of the various licensing rights of these groups,'' says Mr. Kayes.

The accusation, though, is strenuously denied by Mr. Malcolm Fletcher , BBC's general manager. "We pay the Performing Rights and do not need to pay the Mechanical Copyright Society because we don't make phonographic records,'' he says. "As for the other two bodies, I've never even heard of them.'' He adds: "I don't know what Mr. Kayes' contractual arrangements are with his suppliers, but I know what ours are and all of them are fulfilled. We're doing nothing wrong.'' The company admits that there have been "nagging problems'' in the past about the quality of its service, but says they have been cleared up.

Fierce as the rivalry between BBC and Electronic Services already is, the battle for profits looks as if it may get even livelier.

"There's a bit of competition out there for the first time,'' says Mr. Kayes.

"And Bermuda Broadcasting doesn't like it one bit.''