Parliament banned illegal overseas call-back companies from providing services to the Island yesterday after MPs debated the clamp-down in the House of Assembly.

Minister Paula Cox -- stepping in for Telecommunications Minister Renee Webb who was absent due to the death of her mother -- read the amendments, which could see telephone companies abroad who offer cheap long-distance phone calls to Island-based customers landing up in court.

It was estimated that the three illegal providers, who are believed to be Fiber Tel, Global Tel and Call Save, cost the Island's two local providers about $3m in lost calls every year.

Ms Cox, Minister for Labour, Home Affairs and Public Safety, announced that it was time to ensure that illegal carriers did not operate in Bermuda and that Cable and Wireless and TeleBermuda were given some assistance from Government in return for investing in the country.

She said there were four words that came to mind when she read the amendments to the Telecommunications Act.

They were "competition, cost, controls and consume''.

And she said as a result of the proposed ban and changes to enable greater competition, customers had seen the cost of legal overseas calls drop from about $1.10 to 26 cents a minute And she said controls were essential, particularly in telecommunications, if the professional integrity of the Island was to be considered.

She added: "The FCC (Federal Communications Commission) now has Bermuda on its list of countries that prohibits call-back companies.

"The FCC clearly states that call-back providers are not authorised to provide service to countries that have expressly banned them. They are prohibited in Bermuda.

"Does this mean that Bermuda residents who subscribe will be prosecuted? "No. Only businesses and persons that assist or provide a call-back service in Bermuda.

"We have a responsibility to the consumer in Bermuda. We have a responsibility to those who have invested in Bermuda. We have a responsibility, to some degree, to try and assist them.'' And she said any illegal overseas company, which is operating in Bermuda without a licence, could be fined up to $50,000.

In the summer, Ms Webb revealed she wanted to make changes to the telecommunications law to ensure a better service for the customer and greater competition.

She said she wanted to ban illegal call-back companies, which have hundreds of customers in Bermuda, who received a long-distance phone call service for a fraction of the price of Cable and Wireless and TeleBermuda.

But she also said she wanted to allow local Internet service providers to provide long distance calling facilities using the World Wide Web. This meant creating greater competition for long distance calls, resulting in a rapid drop in charges.

And Ms Webb also agreed to let giants Cable and Wireless and TeleBermuda to enter the Internet market by allowing them to provide services to Businesses.

She said she had given something to everyone, and taken away something from everyone.

However, the move turned controversial when Cable and Wireless threatened to scrap plans for a $110 million investment on the Island.

Call-back companies disconnected would added competition, and Government was accused of protecting the big foreign corporations by allowing them on to the Internet market.

Opposition Leader and spokeswoman on telecommunications Pamela Gordon said the party supported the ban on illegal call-back companies yesterday, but warned against "protectionism'' of foreign corporations on the Island, saying it could impair the quality of service.

But she said long distance rates had been too high for a long time and she said it was important the customer received a quality service at a value for money price.

But she asked how Government planned to prosecute call-back companies and hand out either the $50,000 fine or two-year jail-term.

She said: "How do we anticipate enforcing this piece of legislation?.

"While it looks good on paper and I understand the FCC has given us support and lip service ....who are we going to imprison and how? "I believe it is a nonsense if we are unable to enforce it. We may as well put the fine up to $1 million.'' Opposition Legislative Affairs Spokesman and lawyer John Barritt said it would prove very difficult to prosecute people who did not live in Bermuda.

He said he had no doubts that the call-back companies would eventually find ways around the ban and continue to poach Bermuda customers using new methods and a little creativity.

At the moment customers call a number and hang up. The overseas carrier then calls them straight back giving them an open international phone line.

Local providers can monitor which households use call-back, but he said the illegal carrier will fathom a way around it.

And he said that it was fair to have some protectionism on the Island for those companies that were situated here, such as Cable and Wireless and TeleBermuda, who provided jobs to Bermudians.

Shadow Finance Minister Grant Gibbons said the deregulation of telecommunications by the previous United Bermuda Party Government had been beneficial to the Island and for telephone providers.

"The UBP recognised that in order to provide for anybody coming in they would have to do it with a facilities based service and there was a need for protection,'' Dr. Gibbons said.

Quoting US Presidential candidate Al Gore, Dr. Gibbons said protecting the new company was "sort of like going from ice to water'' in that there was a "mushy'' stage that was crucial to the change.

"You do that in order to be able to get that choice in the service you want,'' he added. "The reason you don't want a call back service coming in is that they're getting the benefit of a low bulk rate in the US and Cable and Wireless and TeleBermuda doesn't get anything.

"Essentially we are paying for that service and they keep the funds,'' he said. "That balance is important. Right now (C&W and TBI) are close to having a balance (between incoming and outgoing calls).

"The callback provider is not paying for the infrastructure into Bermuda.

They are basically in the business of undercutting the service provider. But a lot of what we envisioned back in the 1990s is now coming to fruition.'' Ms Cox thanked Parliamentarians for their "wide ranging'' and "intellectually stimulating'' debate.