WebHosting Companies keep increasing sales by getting more competitors in the market. Selling reseller accounts can be very profitable, but in the end it might be worse. Hard thing to decide on eh?

Well, even if you don't provide reseller accounts, others do.

Reseller accounts dont offer enough space/bandwith for competition. Plus, many people who buy reseller accounts will cancel them after they realize how diluted the market is.

Agreed. This is why most companies are now moving away from web hosting accounts and starting to offer low-end high-bandwidth virtual and dedicated servers.

I would have to disagree! There are a lot of local web designers who sell directly to their customers of which don't know the difference and dont' want to be bothered by taking care of it on their own. In this case it becomes a VAR -- which goes a long way!

When it comes to Reseller's its really a matter of its better to work with them than against them. Almost all the Resellers I work with are Web Designers, they have their set of clients and their client's are very loyal to them.

What's more their clients tend to be "hands-off" and have no interest in dealing with the technicalies of running a web site and most have no idea what a web host does. Web hosts are not competing for this type of customer.

Resellers who are trying to pitch for the same type of customers as Web hosts will struggle, simply because the marketplace is so damn competitive and they won't be able to offer the same features that bonefied web hosts can offer.