Ocean, the telecommunications company, has instituted legal proceedings against Eircom for allegedly refusing to provide capacity to Ocean for its Internet service, oceanfree.net.

However, Mr Gerry O'Sullivan, director of corporate relations at Eircom, said last night that his company "regard the claims by Ocean as highly misleading and will contest them vigorously and with full confidence."

The chief executive of Ocean, Mr George McGrath, said that Eircom was deliberately attempting to stunt the development of competition in general and Ocean's services. He added: "We have reluctantly gone to the courts to ensure that Eircom immediately provides us with the level of capacity that is required to meet the demands of our customers. We will also be seeking financial compensation from Eircom for the millions of pounds in lost revenue as a result of their actions."

However, Mr O'Sullivan disputed the Ocean allegations. "We have serious difficulties with their inability to properly forecast their infrastructural requirements," he said. "The real irony is that the process that we have in place to deal with Ocean and other operators is much more lenient and flexible than British Telecom's."

Ocean claims that Eircom has refused to supply an agreed level of capacity to the company, as well as refusing to accept new revised capacity forecasts from Ocean following the launch of oceanfree.net in June.

Eircom said that Ocean initially requested only 4X2MB circuits which Ocean believed would be enough until 2000, but since then it has raised its requested capacity to 200X2MB circuits by December of this year.

Ocean also alleges that Eircom has continued to provide adequate levels of capacity for its own subsidiary businesses, including Eircell, Indigo and Eircom.net.