Oligopolies and Their Domino Effect

Written By: Lameena Chowdhury

Have you seen a stack of dominoes in a perfectly aligned circle with just enough space in between? If you haven’t, don’t fret – we’ve attached an example below for your convenience (4)!  If you flick one domino, it doesn’t fall. It leans down on the domino to its falling side. This causes this new domino to do the same to its falling side. The process goes on and on till all dominoes are now leaning on each other. The neat circle hasn’t fallen apart but it isn’t perfect any longer. 


If we applied this phenomenon to oligopolies, which are big firms with few rivals, then we would see that the falling domino effect applies to them. How? Big firms such as monopolies and oligopolies have dominant market share and sometimes subsidiary firms. The secondary firms are dependent on the bigger firm to provide them with the core service. So, when the big firm runs into a problem, the secondary firms and their service are disrupted. Now every consumer who uses the big firm’s products or the secondary firm’s products finds themselves at a loss of service. This is what happened in Rogers’s recent network outage.

Canada’s telecommunication sector

Canada’s network system is dominated by three major companies: Bell, Rogers Inc., and TELUS Corp. Their 4G LTE and LTE-A networks encompass 20%-30% of the country’s geographic area and provide service to 94%-99% of the Canadian population. As such, they can charge high plan prices due to lack of competition, high barriers to entry, restrictive policies, etc. (5). How can a new company enter a market like this? By investing a lot of capital that they can spend on building their empire but very few are able to do this. For example, Wind Mobile spent $442 million to obtain licenses and roll out cell towers to compete with the Big Three (5).

Canada has expensive phone plans (approx. $74/month for 2GB data) if you compare it to other developed countries such as the United States (approx. $60/month) and Australia (approx. $22/month). The Big Three gain about 90% of the mobile phone market revenue, approximately $29 billion annually (5). These are big numbers, and every firm is profit-maximizing, so it comes as no surprise when you learn that this market has high barriers to entry. The oligopolies know that the industry is tempting, and that is why they safeguard the telecommunication sector from new firms.  

More specifically, the Big Three have steered the sector by establishing multiple network carriers to create an illusion of competition. That is, each of the Big Three has smaller network carriers offering consumers a range of options in prices and plans. For example, Bell has Virgin Mobile, TELUS has Koodo, and Rogers has Fido (2). It is deceptive, is it not? Canadian citizens are presented with the grandeur of options when they never had any. These oligopoly firms hold all the puppet strings in the telecommunication sector. In addition to the cell phone network and mobile data, they also provide WIFI and smart appliances, some of which have their own plans. As a result, when Rogers’s network outage occurred (not once but twice), the whole nation fell into chaos.  

Canadian network companies and their provincial reach (2)

Roger’s network

The first outage occurred in April 2021 due to a fault of the ‘Ericsson software update that affected a piece of equipment in the central part of the wireless network’. This incident occurred in 2021 when Canada was still issuing lockdowns, and citizens were booking vaccination appointments and emergency calls to 911 (1). Many business dealings (sales and cashless payments) were also impacted, along with people working remotely. Worse yet, it wasn’t just the case for consumers using Rogers, but everyone using Rogers’ subsidiary firms like Fido and Chatr was also stranded without any network (1). We can only imagine how difficult and tense it may have been for those who struggled to reach out for help when needed.  

The same incident reoccurred on July 8th, 2022, more than a year after the first outage. This time, due to faulty maintenance. Similar to the previous outage, the same establishments were affected. Online payments were unsuccessful, debit cards were not working along with Interac payments. Calls to 911 were not going through, and internet/ WIFI at houses and educational institutions were at a failure. Moreover, when Rogers’s network went down, so did its secondary networks like Chatr and Fido, and the whole nation suffered. For example, Bell and TELUS users had their coverage but everyone they knew with Rogers’s coverage was out of reach.  The collateral damage of one provider going offline raises questions about how this big oligopoly system is governed- if at all (3).

Domino effect

The domino effect, as described above, is what we are seeing in Canada’s telecommunication industry. This paper is an attempt to show that when Rogers’s system blacked out, every other institution that relied on them, also experienced a network failure. Like dominoes, when you flick one domino, all of them fall. Mitigating the damage by compensating users is not enough. What needs to be done is to change the system. The only reason this systematic failure attracted  so much media attention and coverage was because this was a nationwide occurrence affecting almost every household. 

Experts have pointed out that introducing or fostering competition between network providers would diminish costs for consumers. They suggested making the network infrastructure a public domain, as has been done in Australia, to boost competition. While this sounds nice in theory, it will be incredibly costly to set up cell towers and cables (3). Additionally, with added firms, there will be price competition while firms try to lessen their marginal costs. This might eventually lead to a fall in service quality. So, how can this sector be better? It is generally believed that policy changes and government intervention may be the starting point.

On a side note, it is worth noting that the same institutions suffered both times the network outage occurred. This raises some questions. Did Rogers fix anything from the first time? Did they take any steps at all to prevent this from happening again? Evidently not since it did happen again. Furthermore, why is the government not prepared to handle a crisis like this? These are some questions raised by politicians, influential individuals and citizens alike, to which we have yet to receive answers.

To conclude, powerhouse firms such as oligopolies can fall, bringing devastating effects on the economy and every individual dependent on them. Just like dominoes – when one falls, the others are forced to fall. 




Works Cited:

(1) CBC/Radio Canada. (2021, April 20). Rogers says service starting to return after Canada-wide wireless outage. CBC News. CBCnews. Retrieved from https://www.cbc.ca/news/business/rogers-outage-1.5992954

(2) Compare Canadian Mobile Network Coverage. Compare Cellular. https://www.comparecellular.ca/coverage-maps/

(3) Shingler, Benjamin. (2022, July 12). Rogers outage points to need for greater oversight of Critical Industry. CBC news. CBCnews. Retrieved from https://www.cbc.ca/news/rogers-outage-regulation-1.6517090

(4) PX_Media. (2018, December 28). 3D White Dominoes Standing in circle stock illustration – illustration of fall. Dreamstime. Retrieved from  https://www.dreamstime.com/d-white-dominoes-standing-circle-image135349440

(5) Wideman, A. (2022, June 2). Why are cell phone plans so expensive in Canada? Cansumer. Retrieved from https://cansumer.ca/canada-phone-plan-pricing/

(6) Honderich, H. (2022, July 20). Rogers outage: Why a network upgrade pushed millions in Canada offline. BBC. Retrieved from https://www.bbc.com/news/world-us-canada-62174477

Leave a Reply

Your email address will not be published. Required fields are marked *