No matter what the companies offering callback services say, or how US regulators view them, what they do in Bermuda is illegal.

This policy has been in place for some time. Callback services skim the cream off the top of established long distance phone providers by using their equipment to provide a cheaper service.

Consumers may benefit in the short-term from lower rates, but they suffer over the long- term because the established providers will be unable to spend the millions of dollars needed to continue to improve the infrastructure that consumers want.

At the same time, Government must continue to ensure that the established providers -- in return for the protection they receive -- do not rip off their customers.

Rate controls go some way to making sure of that; competition between Cable and Wireless and TeleBermuda International should do the rest. Nonetheless, Government needs to be vigilant in order to make sure the right balance is struck.

Cable and Wireless and TeleBermuda should also recognise that the best way to keep the callback services away is to ensure their rates are competitive.

RETAIL PROBLEMS EDT Retail problems It is sometimes hard to feel sympathy for Bermuda's retailers, who can be accused of having failed to keep up with the times.

But there should be no question that many of them find themselves in increasingly dire straits and it may not be long before boarded up shopfronts start to appear from Court Street to Front Street.

There are a number of causes for the retailers' problems.

Some are structural. Gibbons Company managing director and former Premier Sir David Gibbons noted in yesterday's newspaper that Bermuda has a high concentration of shops for a population of 60,000.

He is right. The reason is not that Bermudians are shopping addicts -- in spite of what you may see in the Airport Customs area -- but because many of the Island's shops are geared to visitors, and the tourism industry has been in a 20-year decline.

But some of the reasons for the decline in tourism are the same ones that afflict retail generally and solving the problems could help tourism to recover as well.

Importing goods to Bermuda will always be costly. Customs duties remain high, although they have been falling and can continue to do so if Government is prepared to bite the bullet.

But the most difficult aspect is high labour costs. High wages are necessary because of the high cost of living; but high wages also drive up the cost of goods and the inflationary spiral continues, especially when people shop abroad, thus taking those high wages out of the local economy.

Unless and until Bermuda is prepared to force its rate of inflation below that of the US, its main trading partner, the Island's retailers will continue to suffer.