Competitive pricing and competing on price are two different things. It is good business to know your market and compete on that level but you never want to compete with these fly by nights that have a $10 reseller account and are only interested in making some money to blow at the mall. In the end, if you keep a consistent business model, you will prevail and succeed.
I think that instead of competing on price, you have to add more value added services to seperate yourself from the flies. It is human nature to want a good deal, even if it sounds to good to be true and that is why there will always be these $1.00 hosting outfits. They have nothing to lose and can make a quick grand and then close up shop without any regard to the clients that are left hanging with their website down and host gone fishing.
Bottom line is, don't worry about the flies, because they will end up swatting themselves.
