Which Country or probably State would be the best and not over utilized for selling off your web hosting services? It totally depends on the interest of the people. You may not tell exactly but guesses are also welcome. 
I think US, UK, Australia, Canada, and India have good usage of Web Hosting services… you can target this countries you will get good business out of it. But make sure thet you will able to provide best services and price then other hosting services provider.
Web hosting business can be very lucrative, but it is quite difficult to get into it, because of the competition… The countries mentioned by maggyparker are probably the best in my oppinion, but I think you should foccus on finding people that can promote your hosting services too. Many marketers that are into the web creation business and that usually reccomend other people where to host their sites, that could be one place. There are also those sites where people look for host comparisons, and where that webmasters post the hosting companies in the supposed order from best to worst, when usually, they tend to place those in the comission order (again, usually, not allways). If you contact them and sell well your hosting company plus add them a good comission, you’ll get clients from everythere in the world.
Keep the prices in mind, also the service, and if you can add an extra service, like internal web builder, that is just a plus.
Good luck in your adventure!
The best location to start with is where you live. You can then actually spend time meeting with prospects and customers, rather than trying to be another low-end godaddy type host. Spend some time talking to your customers and you’ll work out how you can stand out in a very competitive industry.
Do a research for countries that have large numbers of internet users, especially small countries. Web hosting business in these countries is just start blooming, your competitions may be not much but you’d better prepare your self with country’s economic and politic policy.
For web hosting business target the us based location.
According to me India is the best web hosting business country.
Just saying “US” or “India” is really not very helpful. Please explain your reasons for your suggested location. Any more posts which simply name a country without any other information will be removed as fluff.
jsmcgregor hit the spot there. When you’re starting a business, may it be a web hosting company, and SEO company, or whatever it maybe, it’s always good to start spreading word about whatever it is that you’re running to the people in your community. Who knows? You might find a client that will stick to your services for a long time. If they happen to see that you’re really giving the best service, there’s a chance that they might recommend you to their partners, or their friends.