I don't thin the governemnt taking over all ROW would necessarily be good for the railroads.
In many cases, railroads enjoy relative monopolies. If the competion needs to take a longer and more circuitous route, then you are at a natural advantage.
If the government were to own all the track, railroads would no longer compete on the basis of geographic advantages or speed but it would just be about price. A race to the bottom would ensue which would damage the industry as a whole.
More likely, the fair and open competition would serve to sort the industry out. It is the state of monopoly which you praise that causes the degraded state of rhe tracks we encounter on the Amtrak trains we all ride and love. Think of how many of a railroad's customers are essentially captive.
Suppose you're a large dairy processor and for the sizes of shipments you get, it wouldn't be price-competitive to haul them by truck, so you have to use rail. Your plant is off BNSF track, so you call for the rate. It's higher than you hoped? Too bad, you can't call anyone else. Shipments start coming late because they're skimping on maintenance on your line? Too bad, you can't call anyone else. They arbitrarily raise their rates on you? You get the idea. In a monopoly, there is no incentive to improve service or reduce cost.
Anyone who's ever lived in a house with only one choice cable/internet/phone provider knows this all too well. I think it also explains some of the atrocious customer service on Amtrak.
The only way opening railroading up to real competition would "damage the industry as a whole" is if you consider industry to be only is current players, because some big names might indeed go under. Some might be so used to not having to fight for customers that they never adjust. If some operators race to the bottom, eventually one will hit it and die, leading the others to change course. The market will stabilize within a couple of years, and the companies that emerge as profitable will be those who can deliver freight and passengers with the best combination of speed, service, and efficiency, which by my measure means the industry will be drastically improved, not damaged.