Colocation In Milwaukee, Input

I'm thinking about colocating in Milwaukee, purchasing a rack over at the Cogent facility to resell and was faced with a problem. The problem is, to some people, a rather simple one. How can a reseller sell their servers when competition sells their services for unlimited space, bandwidth, domains, sub-domains and such for only $1/month?

I've done the math I could with the information provided to me but am not able to get around the above problem. I can see why some users go to this type of service though. A lot of websites don't even need more than what these sellers offer, and with good reason.

Usually that person only uses 10MB of space and 10GB of transfer.

To break even on hosting, I would have to be able to sell 12 servers at $169 each. Our hardware would be fairly new, capable of whatever you want it to do, short of cutting your lawn, clipping your toenails and what have you, all with 5mbps standard port connectivity inside a 1u case. Obviously you can upgrade the port speeds, drives or whatever else you need in it. This is to snag users into coming with us. Bigger guys charge much more per month for higher end hardware.

I guess what I'm trying to ask is simple. Is it even worth it? Are there users out there who are happy and able to put down $100+ a month for a dedicated server? I'm willing to expand our current services to this type of offering, but I need your input based on your experiences on what you think will end up happening.