I don’t follow how the existence of companies succeeding in the face of competitors with “network effects” supports the idea that network effects limit competition...
I agree network effects are part of the value of the product, but I don’t see how that limits competition. Users can have both a Facebook and a Twitter, or Facebook and MySpace, etc. Network effects don’t stop people from joining other networks.
Because MySpace was a substitute good for Facebook and vice versa. If only a fraction of (certain strongly-connected) MySpace users
stop updating there and only use Facebook, MySpace's network effects collapse and thus competition decreases.
This is of course what happened. I joined Facebook when it was first opened for my school (long ago). I immediately loved the UI over the XSS dumpster fire that was MySpace, but I knew like two or three people there. I kind of forgot about it, but checked back a couple months later, and suddenly I knew a bunch of people on Facebook. My days of using MySpace at that point were basically over. The data indicates this was not merely an anecdote, but basically how MySpace died.
EDIT: Also, the way antitrust law is written, anything that has this kind of network effect will likely be a candidate for a monopoly. It's almost inevitable. The courts and legal establishment have over time added the criterion that antitrust should only be enforced when monopoly power harms consumer welfare (usually understood to mean higher prices), which is a much trickier proposition in the case of Facebook.
I agree network effects are part of the value of the product, but I don’t see how that limits competition. Users can have both a Facebook and a Twitter, or Facebook and MySpace, etc. Network effects don’t stop people from joining other networks.