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The battle for market share between telecommunications Bell Canada and its new national rival, Telus Corp., has moved into federal prisons.

Telus has formally complained to a federal quasijudicial tribunal about losing a multimillion-dollar contract to supply phone cards to jailbirds.

The Burnaby, B.C.-based telecommunications company, in the midst of a tough struggle with Bell Canada to control the national phone market, has persuaded the Canadian International Trade Tribunal to investigate a contract that Correctional Services Canada granted to Bell, the CITT said yesterday.

The contract in question would provide federal inmates with smart cards that would set up accounts for intercity phone calls. Telus would have provided specially designed phone equipment and software so that inmates' calls could be monitored by government officials.

Telus says Correctional Services Canada -- the branch of the federal government in charge of federal prisons -- handed the Bell the contract instead of holding an open bidding process that would have allowed Telus a fair chance at winning the work.

"It is the belief of Telus that the proposal submitted by Bell did not have the lowest rates, of the proposals received by CSC, on each of the designated services," Telus says in documents filed with the CITT. "The result is that the selection of the proposal submitted by Bell was in breach of the AIT [Agreement on Internal Trade]"

The CITT said yesterday that Telus's arguments had enough merit to warrant a full inquiry. If the CITT finds in Telus's favour, it could order the federal government to cancel the contract, start the bidding process again from scratch or even compensate Telus for lost profit. The process takes about 90 days and can be appealed in Federal Court.

Neither Telus nor a spokesman for Correctional Services Canada would comment on the case except to confirm that it exists. Correctional Services Canada would not even say how many prisoners would be likely to use phone cards.

But documents filed with the CITT say that Telus figures the telephone service contract would be worth "several millions of dollars per year."

Telus is accusing Ottawa of breaking the AIT's rules on government procurement. The government, Telus contends, did not select the winner of the contract based on criteria outlined in the tender, and also discriminated against Telus by not making public all the details of the contract. The winner of the contract, Telus says, did not fulfill the requirements set out in the public tender.

Federal prisons house about 13,000 inmates, of which 97 per cent are men. The average cost of imprisoning a man for a year is $59,661, compared with $133,610 for a woman.

Telus has been on the offensive against Bell, a unit of BCE Inc. of Montreal, in its attempt to go from a western phone company to a national telecommunications firm. Telus merged with BC Telecom last year, and recently bought a 70-per-cent stake in QuebecTel Group Inc. for $585-million.

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