Whereas lines of competition are clearly defined in the more established industries, in the Internet industry they are blurred and indistinct, as companies that compete one day may be partners the next.
Option Elimination -
A. Whereas lines of competition are clearly defined in the more established industries, in the Internet industry they are blurred and indistinct, as companies that compete - "whereas" introduces a subordinate clause with an idea that we want to contrast with the independent clause. The contrast is logical. "as" introduces an adverbial prepositional phrase and modifies the "they are blurred and indistinct." "that compete" is restrictive and qualifies the companies we are discussing. In Software, if we have one company providing system integration services and there is another company such as Microsoft or any Software product company, then the relationship between them is not necessarily of competitors. The SI can be a partner. So it's crucial to restrict the kind of companies we are talking about, as not everyone in software is competing.
Moreover, The phrase "companies that compete" suggests that the same companies that compete with each other on one day may become partners on another day. Think of it as more of a fluid and dynamic nature of relationships in the Internet industry, where competitors can collaborate or form partnerships depending on the circumstances.
B. Although the lines of competition are clearly defined in industries that are more established, they are blurred and indistinct in the Internet industry, as competing companies - "more established" than what? Wrong. There is a big problem with "as competing companies, one day may be partners the next." this may mean that all companies are competing, which is not the intent. SI and Microsoft can be partners while Microsoft, Google, or Amazon compete. So it's very important to restrict which is what "that" does. Without "that" and with "competing" as an adjectival modifier, it may mean that all companies are competing.
Moreover, "competing companies" imply a more static or fixed relationship between the companies. It suggests that there are distinct companies in the Internet industry that compete with each other, but it does not explicitly convey the idea of these companies potentially becoming partners.
C. The lines of competition are clearly defined in the more established industries, unlike the Internet, where they are blurred and indistinct, as companies that compete - "the lines" compared with "the Internet" - wrong.
D. Unlike more established industries, where the lines of competition are clearly defined, they are blurred and indistinct in the Internet industry, as companies that compete - "established industries" compared with "they" logically referring to "lines" - wrong.
E. Unlike more established industries, with clearly defined lines of competition, those of the Internet industry are blurred and indistinct, as competing companies - "established industries" compared with "those" logically referring to "lines" - wrong.