I asked for colocation pricing for servers and it was way more expensive than continental Europe and US. The only reason for it could be they are still far from mass adoption of these services like Netherlands, UK or Germany do.
The reason is different. Power is cheap. Cooling is easier. However network is expensive however due to duopoly. You pay between 5x to 40x more for bandwidth. That's why Iceland is attractive for certain types of hosting but not for others. But this is about to change soon due to additional submarine cable landing.
Never the less, its a perfect location for bitcoin mining. It has exploded in 2014. We (datacell ehf /www.moria.is) are building up 7MW these days (2MW already ready) and in whole Iceland there are currently around 20MW in use for bitcoin mining exclusively. Tendency increasing. But soon there won't be enough power available and it will take some years to build additional power production facilities.