PHP3 & PHP4 question

Hi,

This is a newbie question.

I was told by my hosting company that my server run on PHP3.
Below is the reason that was given to me by my hosting company for my server
running on PHP3.

"We can't upgrade to php4 on the virtual servers as we have other client who
still using php3."

I think he is trying to say that if he upgrade the server to PHP4, other
sites on the same server using PHP3 will have problems? Isn't PHP backward
compatible?

He want to charge me for a migration fee to a server with PHP4. Is it
advisable to migrate to a PHP4 supported server?

Thank you.