AT&T Corp. will launch a managed utility computing service late this year based on hardware from Sun Microsystems Inc. as one of several improvements to its hosting service, AT&T executives revealed in interviews this week.

The utility computing service, to be formally announced and offered sometime in the fourth quarter, would allow businesses -- especially those with seasonal peak demands -- to have automatic and on-demand access to computing resources to scale up and scale down efficiently, said Mike Jenner, vice president of hosting and application management services at AT&T in Bedminster, N.J.

Jenner also said AT&T will announce and offer in the fourth quarter server virtualization to its hosting clients. Instead of being required to run a single operating system per server, users could run multiple applications on the same physical server, each with its own operating system image. With server virtualization, a customer can better manage applications, giving one a higher priority over another, he said.

For customers, the big advantages of both utility computing and server virtualization are rapid provisioning and avoiding the cost of investing in server hardware, Jenner said.

"Customers spend a lot in capital, while their systems often go underutilized much of the year," said Christina Costello, director of product management for AT&T"s managed hosting and utility computing services.

For utility computing, customers each month will pay a base fee to get access to a dedicated server -- roughly half the cost of leasing one -- plus a variable utilization charge, an AT&T spokeswoman said.

One existing AT&T hosting customer, Turbine Inc. in Westwood, Mass., has been discussing the utility computing service with AT&T "quite seriously" as a means of handling enormous surges in network usage when it releases a new online multiplayer game, said Michael Hogan, vice president of technology and operations at the company. "We"re always looking for ways to spike up capability for the first weeks [after a new game release] and then back off," he said in an interview.

Turbine is developing a Dungeons & Dragons online game for release later this year and a Lord of the Rings online game for next year; both are expected to be very popular, he said.

With one earlier game release, Hogan said, Turbine "grossly underestimated resources" and ended up trying to "throw hardware" at the problem. Conceivably, with a utility computing service, Turbine would "have a plan in place, quickly scale up in the near term and roll off," he said.

Analysts said AT&T"s utility computing service appears to be the first offered by a network services provider. Sun, IBM, Savvis Inc. and Electronic Data Systems Corp. offer utility computing and utility storage services, but the market hasn"t grown as much as first projected two years ago, said Ted Chamberlin, an analyst at Gartner Inc.

"Utility computing has been cooking along for a while, but there is limited interest in it," Chamberlin said. "Customers don"t exactly call up and say, "Give me some of that utility computing.""

Zeus Kerravala, an analyst at The Yankee Group in Boston, said AT&T has the technical competency to handle utility computing, but he questioned whether large companies would rely on a networking services provider for a computing-related service.