Yes, that's true. However, considering that most of the hosts out there oversell, that's the situation of most hosts.

Also, what if all the servers in a datacenter would suddenly start using all the allotted bandwidth on a consistent basis? The datacenter would go out of business (or increase the prices as soon as possible).

Now, sure, certain levels of overselling make no sense. They're pure madness and the one losing will always be the customer (for as long as the hosts will use a "resources abuse").