To the contrary, the ubiquity of free stuff has been a boon to entrepreneurship and the small business person. Resources that would otherwise be accessible only to big companies with deep pockets are now accessible for small businesses.
For example, take Google and websites. For, say, around $100 per year (the cost of a domain name and hosting for their website), a small business can now get the same amount of publicity and attention, and reach the same number of people, that would have cost thousands of dollars per year in earlier times. Google, an entirely free service, wants to find the best search results for their users. So users get free search results, and businesses get free promotion of their website. This is just one small example, of course.
Free can work for or against a business. It's up to them how they utilize it. Case in point: Youtube. Youtube is a completely free platform that has enabled literally millions of small businesspeople, performers, artists, entertainers and musicians to promote themselves to the world. That kind of promotion would have cost tens of thousands if not millions of dollars before the internet age. But, there is a loser too: big, traditional record companies and traditional Hollywood. Since entertainment and content are free or near-free now, those old dinosaurs are having a tough time competing. So free can work for you, or against you.
It's true that small businesses cannot give away lots of free product that big businesses can, but small businesses have never been able to compete directly with big businesses anyway. And big businesses have been giving away free products and promotional gimmicks for ages, that's nothing new.