I understand your point, but Pollard isn't a candidate to cut, and there will be a limit to the number of receivers kept, so Austin is naturally competing with Smith as well.
Austin is naturally competing with everyone on or near the bubble. The competition is more or less direct depending on the similarity to what Austin brings to the table.
We're not keeping him to develop, so it's a purely functional role for this year. Does he provide some function we need? He's a run/receiving threat.
Smith, not so much. Smith has some functional overlap with Austin, but not for what we brought Austin here to be - the run/receiving threat.
Of course that value has to compete for a roster spot with other WRs bring, and also but less so with what players at other positions bring.
Drafting Pollard brought in a similar, but probably better run/receiving threat in terms of fit with better size for running and going deep. I expected them to keep Austin as that threat this year, then dump him after Pollard got up to speed in the NFL next year. They probably expected the same. But Pollard has exceeded expectations, and seems ready for prime time.
Pollard delivers the function they signed Austin for. Today. Their competition is for a *role*, not a roster spot, and it looks like Austin has lost that competition already. If Pollard were hit by a bus, Austin would be a lock for the team as the only guy to provide that function they obviously want.
Having lost the competition for that role to Pollard is what put Austin in competition for a roster spot across all the bubble players.
And it's not really the number of WRs, as Austin is non-standard, and so are other guys. Brown is a tiny blocking TE. Pollard is half rb, half wr. Austin too.
The good news for Austin is on the RB side. The Zeke holdout, the meh performance of the bubble RBs, and the apparent ability and likelihood of Pollard playing tailback, all combine to open up the slotwr/jetsweep/parttimeRB role for Austin.