The annual report from the federal broadcast regulator Thursday reaffirmed what has already become apparent from phone companies' fiscal reports – traditional phone service is a cash cow on its last hoof.

In its report for 2003, the Canadian Radio-television and Telecommunications Commission reported that Canada's telecom market grew by a modest 1.1 per cent last year, to $31.8 billion in annual revenues.

All of that gain came from greater demand for Internet and wireless services, the report found.

Internet revenue rose 11 per cent to $3.7 billion, while wireless revenue gained 13 per cent to reach $8 billion.

"Last year, the wireless and Internet markets continued to drive growth in the Canadian telecommunications industry, with both markets experiencing double digit revenue growth," the report said.

"The revenues in the remaining markets, including local, long distance, and data and private line markets declined in 2003."

Revenues for traditional local phone services fell by three per cent as price cutting in an increasingly competitive business offset an increase of 0.2 per cent in the number of installed phone lines.

Long-distance revenue continued to decline last year, down another nine per cent to $5.9 billion. Again, pricing pressures took their toll, since the number of billable long distance minutes increased by 1.8 per cent.

Data and private line revenue fell 1.4 per cent. Private line revenue fell 6.3 per cent, offsetting an increase in data revenue of 4.4 per cent.

While more and more upstart challengers emerge, offering more advanced services such as Internet-based phone service, the CRTC said the market in 2003 remained dominated by the incumbent carriers –Bell Canada, Telus, Manitoba Telecom Services, Aliant and Sasktel. The country was once divided into a five-way monopoly among these five firms.

On average, the incumbents still held about 93.7 per cent of the market in 2003.

Smaller players made little progress and only enjoyed larger market shares in big urban centres, the report found.

At best, up to 26.9 per cent of the local business lines and up to 17.6 per cent of local residential lines were provided by rivals to the incumbents in some major urban areas.

"Our analyses indicate that although Canadians continue to be connected and have benefited from competition, more needs to be done to ensure that we achieve our goal of sustainable facilities-based competition," CRTC chairman Charles Dalfen said in the report.