Murray Brewster, THE CANADIAN PRESS

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OTTAWA - A bitter fight between two of Canada's telecommunications heavyweights spilled into public view Tuesday with Telus Corp. (TSX:T) accusing rival Bell Canada (TSX:BCE) of trying to sabotage a $213-million defence contract.

The feud over the Global Defence Network Services contract was described in a bluntly worded submission to the country's communications regulator.

"Telus has experienced over the last few months a number of cases where Bell Canada has refused to provide services in customer transition situations," said the Telus submission to the Canadian Radio-television and Telecommunications Commission.

"Bell Canada increasingly seems to be engaging in conduct apparently designed to take customers to the brink of termination, even actually refuse service orders to gain leverage in negotiations and discipline the customer."

The paper did not outline specific examples.

Bell Canada used to have the contract - the federal government's largest telecommunication agreement - to manage critical telephone, wireless, data, video and IP (Internet Protocol) services for National Defence, but lost it in an open competition to Telus 18 months ago.

The changeover to the new service was supposed to be complete in June 2008, one year after the contract was signed.

But the migration of individual service points has been plagued with technical glitches and network conflicts that saw telephone and Internet interruptions this summer at two military bases - Canadian Forces Station Aldergrove, B.C., and Canadian Forces Base Winnipeg.

With Telus falling more behind each month, Public Works bureaucrats examined the possibility of cancelling the contract and awarding it to Bell, even though the Montreal-based corporation's bid was 10 per cent higher.

Throughout the changeover, Bell continued to provide service with a series of contract extensions for circuits and service points that had not been switched.

A spokesman for Bell Canada denied the company has attempted to stall or sabotage the transition, insisting it has been more than patient and co-operative during the transition.

"We've gone above and beyond in backstopping service," said Mark Langton, vice-president of communication.

"Bell has ensured that service has continued multiple times so an accusation that we have done anything to slow that down is absolutely untrue."

The latest extension is set to expire Dec. 15 and Bell recently laid down conditions that sparked outrage within the federal government.

In order to continue the arrangement, the corporation demanded a five-year commitment with a minimum of $1.5 million, regardless of whether it provided any service.

Public Works has asked the federal regulator to a set price that would be fair and reasonable for keeping the Defence Department's phone and Internet lines operating during the transition.

If the CRTC won't do that, the federal government demanded that Bell be forced to negotiate reasonably.

Langton said Bell will continue to provide service and the unswitched lines at the Defence Department will not be cut off.

Telus has said it will complete the switchover by April of next year, but the Defence Department has set aside up to three years of transition funds.

A document leaked to The Canadian Press last week warned: "DND is very concerned Telus will be unable to complete implementation (including acceptance) by October 23, 2008 or even by mid-December 2008, when the current Bell contract expires."

The memo was written by public works staff on Aug. 4.