Looking for cheap Web hosting? Don't look to AT&T. Customers, however, say they're willing to pony up extra because its services are among the most consistently reliable in the business.

Reference publisher Merriam-Webster, whose free site serves 100 million pages per month, picked AT&T in 2001 after four of its previous hosting providers went out of business or were acquired, says Michael Guzzi, manager of electronic products. "We wanted a provider with some financial stability," he says.

According to Guzzi, Merriam-Webster's Web sites haven't experienced a single outage in the past year attributable to AT&T. He says the company's performance-monitoring services have been superb. "They usually detect a problem before I do," he says. "That communication is a real plus."

AT&T's biggest minus: It's pricey. Customers and industry analysts estimate that its Web hosting services run 10% to 15% more than the industry average. "AT&T could always become more cost-competitive," says Davidson Scott, director of architecture and infrastructure for Michael Baker Corp., an engineering and energy consulting firm in Pennsylvania. "I'm always making that argument with them, and they're responding. They acknowledge it's a competitive market."

But more important than the raw price is "whether this provider is going to be around for the next three to five years," says Bryan Garcia, chief technologist for TALX, a St. Louis-based payroll and human-resources services company. "Having to move hundreds of servers could be wildly disruptive for us."

When Garcia and his team toured AT&T's Dallas data center, they saw that the company hosted the equipment running its network there. That wasn't always the case with other providers TALX evaluated. "Seeing AT&T eat their own dog food?that impressed us," Garcia says.

AT&T has proved its worth to the U.S. Golf Association, says Bill Lacey, the organization's manager of Internet services. The USGA's 20 Web sites include that of the U.S. Open championship, which this year delivered 75 million page views over four days. "Our marching orders internally were, 'You guys can make mistakes?except for the U.S. Open site,'" he says.

For $225,000 annually, the USGA can serve up to 30,000 gigabytes of data over AT&T's network. That fee is about 15% higher than the previous operating costs for the association's Web sites, but Lacey believes the quality of AT&T's hosting services has helped attract new sponsors: "The business value has outweighed the cost."

AT&T Operating Results*

* Fiscal year ends Dec. 31; YTD reflects first nine months. operating expenses for the nine months endED Sept. 30, 2004, include impairment, restructuring and other charges of $12.7 billion.
Source: company reports

Other Financials**

Total assets - $32.06B
Stockholders' equity - $6.44B
Cash and equivalents - $2.63B
Long-term debt - $8.88B
Shares outstanding - 795M
Market value, 1/10 - $14.95B
**As of Sept. 30, 2004, except as noted