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Telus Corp., Canada's second-biggest phone company, has won a literally captive market after all -- as well as a round in its fight to displace No. 1-ranked Bell Canada from its preferred position as a government supplier.

The Canadian International Trade Tribunal has upheld an appeal by the Burnaby, B.C.-based company and overturned a multimillion-dollar contract to supply phone cards for federal prisoners that Correctional Services of Canada earlier this year awarded without tender to archrival Bell. Instead, the quasi-judicial body awarded the business to Telus, calling it "the only compliant bidder."

The tribunal issued its decision Thursday, the same day Telus -- formerly Alberta Government Telephones -- embarrassingly lost out to a Bell-led consortium on a $193-million contract from the Alberta government to build a high-speed Internet network throughout the province.

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In its appeal, launched in early July, Telus contended that Corrections Canada simply handed Bell the contract instead of conducting an open bidding process that would have given it a fair shot at the job. The tribunal said in its decision that it had determined that the B.C. company's complaints "in part are valid," although it said it will not issue its reasons until a later date.

"Obviously we're pleased that the points we raised have been found to be justified and we look forward to working with Corrections Canada," Telus spokesman Douglas Strachan said yesterday.

Bell, based in Montreal, has the right to appeal the tribunal's decision to the Federal Court of Canada. However, Bell spokesman Norm Berberich said that until the tribunal issues its reasons, expected within a week to 10 days, "we can't really say . . . what our response will be."

However, Mr. Berberich added that "it's safe to say we're disappointed by the decision and still believe we had a very good initial offer."

Officials of Correctional Services Canada, which oversees federal prisons, could not be reached for comment.

Under the disputed contract, federal inmates would be issued smart cards allowing them to set up accounts for intercity calls, and Telus planned to provide equipment and software that would enable officials to monitor the calls.

In appeal documents filed with the tribunal, the company said it expected the contract to be worth "several millions of dollars" a year. It also contended that Bell's proposal did not have the lowest rates and that, as a result, Corrections Canada had breached Canada's Agreement on Internal Trade by awarding the business to Bell.

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The tribunal has yet to rule on a second complaint Telus launched in July, over an $88-million contract Ottawa awarded Bell to supply communications systems to the Department of National Defence.

On another front, meanwhile, Bell got rapped on the knuckles by its federal regulator over a promotional scheme designed to help it win back local, residential telephone subscribers from competitors in Ontario and Quebec, where it remains by far the dominant service provider.

The Canadian Radio-television and Telecommunications Commission rejected a plan under which Bell would permanently waive its standard $55 connection charge for customers who return to its service. The CRTC ruled that "given the limited level of competition" that has developed since it deregulated the business in 1997, "a permanent winback promotion is not appropriate."

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