Much work on innovation has focused on the manufacturing sector. In this paper, we propose a framework for analyzing innovation in services centred on capability and technology integration. We illustrate the theoretical points made by conducting a case study on an international telephone communications provider Brastel, which introduced significant innovations in international calling services, in the form of rechargeable pre-paid calling card, through effective application of standard IT. Brastel is situated against its main competitors, considering two dimensions of price and service breadth and convenience. A novel technique for measuring competitiveness based on price and service index is introduced. The following competitors were selected: NTT, KDDI, Japan Telecom, Fusion Communications, J-Call / World Link, G-Call, ASP Check, Primus, QuickPhone, and MCI. To create the service index, factors such as ease of use, convenience, number of languages in which the services are available, and additional features were taken into account. The company itself and the rechargeable card innovation were analyzed through in-depth interviews and data collection. It was shown that a competitive advantage was maintained through internal and external capabilities.