In Bermuda's telecommunications sector, one can see a microcosm of the kind of configurations the interplay between new technology and regulation is taking in larger economies.

The opening up of competition here has brought not only new companies to the market, but has also led to companies expanding across a spectrum of services.

They are responding not only to the competition but to customers who would prefer an integrated range of services from one company, rather than from a number of providers for each piece of their communications system.

This ideal is the provision of end to end service, from consulting on business applications, through to the hardware, switching and cabling, and local and international telecommunications services.

The companies have been classified and regulated as operating as either an international or local carrier, or as a value added service provider.

Thus incumbent Cable & Wireless and competitor TeleBermuda International Ltd.

are classified as operating in the international sphere, taking traffic on, off and through Bermuda.

Bermuda Telephone Co. Ltd., Quantum Communications, and Bermuda Digital Communications Ltd. are classfied as local carriers, which originate and terminate traffic within Bermuda.

Logic Communications, North Rock Communications are value added providers, which rent connection services from local and interntional carriers and deliver a service to customers.

A host of other companies, such as ACT (affiliated with North Rock), BCS, CCS Group and Paragon Bermuda Ltd., provide hardware, and consulting and cabling services.

That rigourous view of the world is now collapsing as industry players begin encroaching across traditional boundaries into other related services -- what consultants and business gurus describe as "one-stop seamless solutions''.

For example industry incumbent Cable & Wireless has bought about 35 percent of Quantum, and about 30 percent of Bermuda Digital, thus giving it an entry into the local carrier market. C&W has also allied itself with Paragon in a plan to implement a data warehousing facility. CCS is also tied in with the Quantum venture.

In another grouping Bermuda Telephone Co. Ltd. has bought Logic, expanding its reach into Internet, data, and consulting services.

And let's not forget Bermuda Telephone won an important court battle giving it control over Bermuda Cablevision. Cable television companies, or rather their cables, are another important piece in the communications jigsaw being brought together by new technologies.

With new software technology Internet service providers like Logic and North Rock also have the ability to encroach on the telephone voice services provided by BTC, Cable & Wireless, Quantum, and TeleBermuda.

US-based IDT Corp, for example, announced yesterday it would offer Internet phone services for as low as five cents a minute for long-distance in 50 US cities. IDT's technology allows callers to dial a local access number then enter a password and the number they're calling.

A high-tech jigsaw puzzle Callers talk to each other using the Internet technology which packages it in a more efficient manner, rather than tying up one line per phone call. By way of comparison Sprint charges ten cents a minute on nights and weekends, and AT&T 15 cents a minute for comparable calls in the US.

With these sector changes the pressure on Government has been to balance the imperatives of competition with the need to foster the starters. That the incumbents can fight dirty is no help.

The loudest screamer on the scene has been Cable & Wireless, which has had up to about 35 percent of its market taken away by TeleBermuda. The company has been muttering about staff layoffs, writs, and compensation in its negotiations with the Government as to when it will be allowed to lower prices without the check of regulators.

The starters are against any such relaxation, charging that Cable & Wireless is trying to hold on to its market by undercutting their rates through predatory pricing.

But the company's competition has only been around for about a year.

Deregulation in Bermuda only began about two to three years ago. The US has had about 12 years of deregulation and has still not relaxed pricing controls on some carriers.

The company's successful application last year to lower frame relay pricing, is an example of the looming battles in the industry.

Compared to having a private leased connection between offices, frame relay is a cheaper way for companies to transfer data. The data is bundled in electronic packages and then is sent down a shared line to its destination, another office.

Interestingly Cable & Wireless' application was made a couple of months after Business Systems Limited (now merged with IBL into Logic) had started GlobalConnect, its frame relay service.

Even though BSL was renting cable connection from Cable & Wireless at retail rather than wholesale rates, the company was still offering frame relay rates 15 percent cheaper.

Then Cable & Wireless made a proposal to lower rates by about 25 percent to US and Canada, by 35 percent to Europe, by five percent to Hong Kong. There was no reduction proposed for traffic to the Caribbean region.

BSL's objection to the Telecommunications Commission was that the rates were only being reduced to the places where BSL offered competitive rates, while rates to places in which Cable & Wireless had a monopoly or near monopoly were not.

BSL's argument was that it needed protection from predatory pricing in order to establish itself in the frame relay market. The company also charged Cable & Wireless was using the high cost of international private leased circuits to subsidise prices in the now competitive frame relay market.

BSL argued that to be fair Cable & Wireless should also reduce the cost of international private line circuits it was renting to the service providers.

Cable & Wireless denied the allegation, saying it should be allowed to compete on the local market. The Telecommunications Commission, in its wisdom, agreed.

What this little battle indicates is that these applications to reduce rates are going to keep coming, so the commission is going to have to keep on its toes in the absence of any firm guidelines.

*** Tech Tattle is a weekly column which focuses on technology and computer industry issues. If you have any ideas for topics please telephone Ahmed at 295-5881 ext. 248, or 238-3854.