I disagree. It's not the practice of a free market that leads towards a monopoly. Market forces tend to push the other direction. If something is offered from one person, it's more likely that another person will attempt to compete with the first. Open and honest market produces a better product. If at the end of that there's only one person standing, they're still providing the better product or service, and will continue to do so until someone else takes their place (And that's built-in, if a product is unacceptable, it's inevitable someone will produce a better one to replace it.) We see this everywhere.
Bad monopolies (or simply bad economics) occur when force or deception is used to the advantage of one over the other. The Mortgage troubles, bank failings, and credit difficulties are fueled by poor decisions, ignorance, and in some cases outright lies. The market only fails when the exchange is dishonest or coerced.
Apple holds a significant portion of market of online music sales. They hold this position because they offered the product in a way that the market found acceptable. If the market didn't like it, Apple would have failed or done just as poorly as any of the previous companies that attempted to do the same thing. EA stuck unacceptable DRM on Spore, making it significantly less attractive to a group of buyers. So the game doesn't do as well. That's how markets function. The market chooses to accept or reject a product or service to the consequence of the provider.
The Microsoft doom scenario is misleading. Yes, Microsoft could do something like that, but we also have to keep in mind that MS wants publishers to make games for it's platform. The publisher wants to make games for Xbox. Because there's a mutual point of interest, MS has an incentive to provide a better situation for the game companies, not a more restricted one. If MS was the only console in town, the Monopoly would sooner or later start to be broken down by a competitor because it's a natural consequence of unacceptable market conditions. The original Playstation is a good example. Nintendo ruled the game industry for a long time, but the difficulties in Nintendo approval and frustration among publishers led to companies (such as Square) to abandon Nintendo for the greener pastures of the Playstation.