They wouldn’t be competing on underlying frameworks though. Epic’s letter asked Apple to extend its app install frameworks and related frameworks to competing app stores.
So the only point of competition would be price, or marketing savvy. This seems to resolve to my point above: reducing Apple’s cut would benefit all developers.
Not clear how the rest does, except perhaps indirectly by forcing Apple and Google to surrender their businesses. And big developers would have a relative advantage. It’s not that small developers would have to run an app store: it’s that the ability to run an app store provides relatively more advantage to large companies who can.
Whether small developers had an absolute improvement might depend on whether prices dropped to match the lower cost structure.
Epic also wants anyone to be able to install apps on ios outside app stores. See point #2, app stores and apps available via direct install. This would lower trust in apps. The trust of the app store has led to an explosion of developer revenue. Not obvious that dismantling this system will help small developers.