The 'competitive' part of it isn't the running of the service, per se, but (supposedly) the regular tender process when it comes to retaining or gaining the licence.
So, a train company runs the service as if they were vying for punters so that their bid looks good the next time the licence is up for offer again.
As I say, that's the theory...as long as you've got competent procurement people it works fine...doh...