I would hardly call c2c to Southend Central and NXEA to Southend Vic competition with one another, even if they were not both run by National Express! Check the difference in fares, for one thing.
I can accept that people who commute to London who live in some places between the two lines (e.g. Thundersley, North Benfleet, Herongate, Dunton) may have a choice between using either line. But that is a relatively small number of people, in some rural areas, and in many cases in communities that are not principally based around people commuting to London. The bulk of the population who commute to London from South Essex generally live in places that are more closely connected to somewhere on one line or the other, but not really both.
Back in pre-c2c days (which illustrates how much things have changed), there was substantial competition with the LTS line (parts of both the main line and parts of the Tilbury loop) from express commuter coaches - above all Southend Transport's X1 and offshoots. I think at one point in the late 80s (when LTS could decidedly not be relied upon to get you anywhere on time) there was something like 16 coaches an hour in the peak leaving Aldgate for Southend! Now....there are none. (I think this historically explains the historically relatively low fares on the c2c route, from when it was decided to try to poach coach-travelling commuters)
As for taking the 357s off the line to replace them with some battered old stock (and how preferable 317s are to 321s, anyway)...well, when it had been announced (as part of a general cascade of EMUs), 10 321s were to be transferred to c2c, there was great pressure from the various line user groups to ensure that they would be refurbished "to the same standard as the 357s", and (at that early stage: of course the proposed transfer has since been suspended), NX gave some hint that they would agree to this.
But in any case I'm not sure they have any reason to remove the 357s. For all the bad reputation that some of the areas served by the line have (to both locals and outsiders) the trains are generally treated pretty well by the passengers. Vandalism is relatively minimal, certainly when compared with, say, Southeastern or the late and unlamented Silverlink. And, having got the stage of regularly winning awards and praise for punctuality, reliability, and the "golden spanner" award too, why would anyone seek to break up a combination of things that evidently work really well....
Although, yes, the point that the line was once a flagship, and testing ground for experiments (as a self-contained network), and then subsequently completely neglected for decades thereafter (oh those hideous 302s and even worse 308s), is a good one. But commercial pressures maybe dictate against this being repeated. As does the development of the Thames Gateway and the slow shift upmarket of Southend (now a university town, with a campus of a proper university, too), as well.
As for merging the franchises? It would certainly fit the general pattern of larger franchises of recent years. (Incorporating c2c into what is now NXEA would boost teh latter's punctuality and reliability statistics, too) Maybe it's about time to make tickets from Southend to London interavailable on both lines, too....
Remember the proposal to turn the WHOLE LTS network (jncluding the East London bit) into a guided busway... Southend Airport station opens Monday the Fifth in other Franchise news......