They probably decided to compete on a numeric basis with the other 15,000 undifferentiated Store Your Big Files Online sites. Competing on numbers is the same as competing on price, i.e. stupid.

OK, maybe that is a little harsh.

But if you reduce yourself to competing on numbers, any numbers, you'll always be at the mercy of the biggest fool in the industry, who will one-up your numbers. Additionally, the customers you get because your numbers are momentarily the best are disproportionately pathological customers: they have no loyalty to you, they have loyalty to The Best Deal, and when you are no longer The Best Deal they will move to the guy who is.

This is the same problem that plagues webhosting at the low end. $10 at our service buys you 1 GB of hard disk and 1 GB of bandwidth. No, wait, $10 at our server buys you 2GB/1GB! No wait, $8 at our service... and before long people have bid it down to stupidly low numbers (< $4), a million people are on a box, reliability is terrible, and folks are churning madly.

I think the key for selling commodities like this is to figure out how to decommoditize your product. MP3 players were commoditized, then Apple came out with one which was a status symbol. Hosting is largely commoditized, but Slicehost has a scalable product which merits non-commodity pricing.