They're still competing with the NFL because for a new league to flourish and stay afloat they need to attract a lot of NFL fans. The AAF isn't winning over viewers because the quality of football isn't the same as the NFL nor are the quality of players. Every new league from the World League in the mid 70s to the USFL in the mid 80s competed with the NFL. If you can't win over NFL viewers you're not going to survive.
There's more to what happened today. Dundon is making a unilateral move here and making a power play to acquire the tech they have been developing. It's a new league and of course it will have lower viewership. Some people may not watch because of the quality, but there are a ton of really crappy college games/teams too. Fans start developing a rooting interest, town, player(s), coach, or eventual affiliation to an NFL teamwhatever, it would grow, especially as some of these players do make NFL rosters. The AAF just got more games added to CBS, not just their CBS sports channel, one of those just before a Final Four game and to TNT as well. The timing is very suspect considering the newly added larger TV time slots, talks with the NFLPA, by accounts have been positive and increased interest from a number of NFL people.
Of course it's not NFL quality, but that doesn't mean it's not competitive or entertaining. It was never meant to or set up to compete against the NFL in any way, but it needs time to show it does have worth to the NFL. NFL doesn't do anything quickly, so expecting the NFL to jump in with both feet within the first 8 weeks is naive in how the NFL does anything. There has been NFL owners, execs and coaches that have recognized the potential and benefit a league like this could have in the future and not just in developing players. It's also a perfect testing grounds for rule and procedural changes. Putting affiliate teams in smaller city and markets extends a teams marketing range and creates more marketing opportunities. Many casual fans may not be interested, by more diehard football fans may become more interested, especially if a team's practice squad players were playing.