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You could be looking at huge bandwidth consumption and as a 'free' service I don't think there's any amount of ad income you could derive from such a site to cover it -- depends on how much space you're giving away and how you'll manage user numbers. A b/w throttle might work but -- sorry -- I can't see it. $20.
10Mb is three MP3s or a porn movie clip. If you have one guy tell ten mates that he has a file there, and you have 100 freeloaders like that, you're in bandwidth problems before you can start building the charged model. Then you'll need more bandwidth from your host to supply even moderate demand, and that can cost you ~$500/mo over and above the hosting fees. Free space would only work as an incentive for people to upgrade if you filter the allowable file extensions. E.g. no .mp3, .avi, .mov, .mpeg, etc. etc. and then at the end of the day they just zip 'em up and you have to allow .zip so you're back to square one. I don't know the answer to this my fiend and I have even been there and done it twice -- once for file storage and once for email -- but the freeloaders and spammers kill it
The only solution I can think of is to provide a demo account with space limits and have them sign up and pay after trying the service out. Good luck!