Do tech monopolies stifle or spur innovation?

Encyclopedia of Opinion

Question: Do tech monopolies stifle or spur innovation?
Position1 of 2›: Tech monopolies have a financial incentive to innovate.
Argument1 of 2›: The AT&T example

AT&T's monopoly in the 20th century allowed it to make technological strides.

The argument

AT&T was a large tech monopoly during much of the 20th century, controlling most of the communication market in the U.S. and Canada. The ability to set prices allowed AT&T to fund long-term research and development for some highly-regarded innovations, such as the transistor. The connection between those two facts is the whole argument: a firm that must match a competitor's price has its margins set for it, while one that sets its own can decide how much of its revenue to commit to work that will not pay for itself for years. Without the ability to set prices, AT&T would not have had the necessary capital to fund long-term projects like the transistor. The timescale is what makes the point. The transistor took more than 15 years before it began to develop into what it is today: hardware used in nearly every digital computer. For those fifteen years the work was a cost with no return, which is not a position a firm can occupy unless its income is secure over the same horizon. A smaller tech company without a monopoly would not be able to invest the resources needed for long-term innovations like this because the effect it would have on their bottom line would not be sustainable. A competitive firm diverting comparable resources would be undercut by rivals who did not, so competition works hardest against exactly the research whose payoff lies furthest away. Further, these long-term innovations foster others: the transistor developed in the 1940's gave rise to the microchip developed in the 1960's. The return on such work is therefore not confined to the product itself but appears decades later in what that product makes possible.

Premises

[P1]As a 20th-century communications monopoly, AT&T's power to set prices gave it the capital to fund long-term R&D behind celebrated innovations like the transistor, which took more than 15 years to mature. [P2] A smaller company without monopoly pricing could not sustain such long-horizon investment, and these breakthroughs compound—the 1940s transistor gave rise to the 1960s microchip. [C] Because monopoly profits let AT&T fund innovations no smaller firm could, tech monopolies have a financial incentive to innovate.

Counter-arguments

This is assuming that the company relies solely on its monopoly for profit. If a company is large enough, it may have the ability to diversify its assets without innovation.

Rejecting the premises

[Rejecting P1] Though they may use some of the profit for innovation, the immense amount of capital at their disposal allows them to simply buy out competitors when they begin to appear.