A small telco startup, launched back in the 1960's, played a critical role in breaking up the Bell monopoly. It's a great story if you're not familiar with it. They were using a new technology that would result in affordable long-distance calls for the masses. Later, they would also create the first commercial electronic mail service.
Consolidation also happens with vendors, think nokia-siemens, alcatel-lucent, cisco bought 100 smallish companies, big companies "innovate" and remain cimpetitive by acquiring the competition
PBS recently aired a documentary on the story called "Long Distance Warrior". It's about MCI and its founder, Bill McGowan. Here's a preview: http://chicagotonight.wttw.com/2011/09/21/long-distance-warr...