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The competitors rail building is pretty terrible, but fortunately you can generally outstrip them in terms of expanding and pulling in profit. You will have plenty of room to expand in other directions in general, and after a couple of years in-game you should be able to buy out any offending competition. Then you get to scrap their terrible track and put in something nice :)
That would be a pretty big change to the game, and I wouldn't expect it, although I personally would not mind such a change. Maybe in a follow on???
You don't have to compete with them directly during the early game. Depending on the scenario you might have to secure a vital city fast but that's intended and not because the AI is overwhelming you.
To avoid them expanding into your territory during mid game add a second station to border towns and secure sweet spots for rural stations and warehouses. Thus the competition will waste money on bridges and tunnels in the worst case while your tracks are the way you want them to be.
In late game you'll merge the competition unless you've done this during mid game.
Each game has it's design decisions. Otherwise there would be only one (railroad) game ;) While the idea of connecting to your competition is nice it would imply a whole lot more than only a connection, basic concepts would have to be changed, it would be different game. A real improvement would be a much better AI competition. Their decisions and the resulting network and lines is improvable in every way.