No reason you shouldn't try. Think about ways you can provide more value than a typical web host. You're not going to win based on price and volume. If you can come up with a way to add something more you should be able to charge more as well.
Also look into specializing. Lately you'll see hosts offering what they claim is WordPress hosting or something similar. I'm guessing it comes with a free install and includes everything needed to run WordPress. Not that you'd have to do the same, but maybe look for a way to offer specialty hosting.
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