To establish themselves in the market, new web hosting providers often offer great deals to attract customers even if it means they will lose money at first. One more reason that new web hosts are cheaper is Moore's law. A simplified version is that you will get a twice as powerful computer for the same money in 18 months.

So a new web hosting provider will get twice as good servers as an 18 month old web hosting provider got for the same money when they started. This also implies that the new web host can offer 50% lower prices and put twice as many customers on each server (or offer twice as big plans for the same money) as the established web host did when they started. This is very simplified, with twice as many customers the web host have to spend twice as much on support, billing etc.. But we are ignoring that now for the sake of simplicity.

The established web host can also rent new servers, move their customers accounts and offer the same prices as the new web host. But if you were an established and profitable web hosting provider, would you slash 50% off your prices? Probably not. You have to double your customer mass to maintain your profits. Alternatively, would you double the sizes of your plans? Maybe, but that would also mean that your current costumers might want to downgrade their plans and your income is reduced. And as an established web host with a good reputation you can easily defend a little higher prices.

So I think it is safe to say that Moore's law implies that new web hosting providers are cheaper than established web hosting providers.