Hey, now you are implying that my signature on a contract does not mean anything and that, that is how I prefer to run things. We are talking about ONE certain contract...and in this case, it involves a month-to-month contract.
As for negotiating earlier, again, you sound like you are reading from a college textbook. Nothing wrong with it, but I run a start-up and things are not usually as perfect as books may make it seem. ie. We did just as aggressive negotiation at the time of signing up and got the best deal in the market at the time. Also note that at the time the server was given to us, the host had put in money that they had yet to recover. When we went back to renegotiate, that cost had been recovered.
"Why sign a contract and then renege six months in?"
Usually because some unexpected variables change. Happens all the time, especially in a start-up. And right now, in this economy, even more so!
Lastly, your point that you should negotiate just as aggressively at the beginning is well taken. However, doing that and re-negotiating to get the best deal at all times are not mutually exclusive.
I am completely in favor of negotiating aggressively, but I like my word and my signature on a contract to mean something, if only because that has value in future negotiations.
As to your situation I don't understand why you didn't negotiate a better deal up front if all of these numbers were available to you? Why not break out hardware reimbursement from bandwidth, rack space, and other services and work out a payment schedule that meets your needs and theirs in parallel with negotiations with other vendors? You have far more leverage when negotiating in parallel than when you are refusing to pay.
Why sign a contract and then renege six months in? The impact on your reputation (based on who else they may talk to or get called for a reference) and your next negotiation with this vendor has yet to be felt but I wouldn't rely on it being negligible.