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Yep, that's what I thought, too.

To me it seems there are two kinds of competition:
competition of products and competition of formats/standards.

The first is obviously good as we can see by the IE example.
If somebody creates a competing product, say, a nicer web browser or DVD player, etc, I cannot see the harm.

It is only when different companies try to dominate the market by pushing their own, incompatible and often closed "standards" that competition becomes harmful.

This is what has happened with IE-only sites or Documents in some closed formats:
You are locked into using one application because the data is not stored in an open format or (in the case of IE-only sites) uses behavior of IE that is not part of an open standard. Another example are DVD or video formats.

I think a good comparison (don't be afraid, no cars ahead ;-)) are railways:
You can have competing companies, using different kinds of trains and having different schedules and prices but the basic, underlying infrastructure has to be standardized. It does not make sense for every company to use a different, incompatible railway type.

Formats/standards/infrastructure is, imo, one of the few areas where competition and free market lead to suboptimal results.
The reason is that competition works best on a level playing field. By allowing competition on data formats and standards you basically allow the players to change the playing field and the outcome will very likely be tilted in favor of whoever puts most money in pushing his own "standard".