It is not just becoming saturated with hosting companies, it is becoming becoming saturated new hosting companies. Some that end up just starting out with no real business plan, thinking they wont need one. I have seen many start up and a year later they are gone. If there were requirement's for web hosting, I could imagine the list being fairly long and hopefully well written. Many forget some of the most important things are what keeps clients happy, customer service is a must! I have seen some with a simple support ticket submitted, and a customer ends up waiting days for a response. That to me just makes me think the company doesn't care about its clients, its all about the money.
Overselling is a big issue as well. I have heard that some overselling is needed in the business, and when it goes over too much thats when the clients start to complain. I am still reminded that if you can talk the talk, you need to walk the walk. Don't sell your clients more than what you have, it will just lead to bigger problems later down the road.
