Government is clamp ing down on illegal call-back services which offer cheap long distance calls from Bermuda.

Telecommunications Minister Renee Webb is in contact with two out of the three suppliers to halt the process and is set to tackle the third provider, who had a Bermuda agent.

The illegal providers are thought to be Fiber Tel, Global Tel and Call Save.

She said two American-based companies each had 788 and 852 clients on the Island. The number of clients for the third is not known.

The cost of overseas telephone calls is set to be slashed after Government announced yesterday it would allow Island companies to offer Internet telephone access.

And the cost of Internet access itself could fall dramatically for businesses as more players are allowed into the market.

Telecommunications and E-commerce Minister Renee Webb said yesterday a change to the telecommunications laws would benefit both the consumer and Bermuda.

She said after the announcement: "The aim is to make Bermuda more competitive. Competition is there now so we should see all different types of access. The market forces should take care of the price.'' Ms Webb announced that two local Internet providers would now be allowed to use the World Wide Web to make long distance calls -- effectively slashing the price of calling off the Island to the cost of a local call.

And the Minister also revealed that both long distance carriers Cable & Wireless and TeleBermuda would be allowed to offer Internet services to businesses on the Island.

Ms Webb said she expected to see a wider range of services on offer such as unlimited Internet access because of the increase in competition.

Bermuda currently has the third highest cost of Internet access in the world.

Phone rates to be slashed And Ms Webb said she hoped Government's decision would bring the cost down to make it more competitive in a world market.

Since competition was introduced in the long distance telephone market, the cost of long distance phone calls have been slashed from $1.20 to about 45 cents a minute.

Now costs could go down even further with the introduction of new players to the market in the form of Logic and North Rock.

Both Cable & Wireless and TeleBermuda have said that, while they are digesting the news, they are worried about the implications of the changes.

The main cause of concern is the Internet phone service -- called the voice over Internet protocol (VOIP) which allows callers with a special headset and speakers to make international calls over the Internet for the cost of a local call.

Traditional long distance providers such as Cable & Wireless and TeleBermuda have been staunchly against the idea of VOIP, stating they had spent a great deal of money on providing a reliable telecommunications infrastructure.

They said Internet companies did not provide the same back-up if systems go down, leaving Bermuda vulnerable without a properly maintained and backed up telecommunications infrastructure.

But Ms Webb said she had tried to balance the needs and wants of all parties and the decision was made after extensive consultation with them.

"On one hand, we have given each what they wanted, as well as taking something away,'' she said.

The ruling will end a lengthy legal battle between the Government and Logic Communications over their long distance Internet phone service LogicPhone, which was launched in July, 1999, with the promise of slashing the price of calls.

Government ruled that Logic was breaching its licence and it was a criminal act for the company to operate such a service. The service was removed on August 1 and both sides had been battling ever since.

TeleBermuda joined in on the side of the Government and the case went to court with Logic's bid to get the service reinstated failing.

Now a pending appeal by Logic is expected to be dropped as they will be allowed to offer the service in dispute.

C & W may pull major investment in Bermuda -- See Business, Page 33, for full story