By Stephanie N. Mehta

(FORTUNE Magazine) – Greg Maffei, CEO of 360networks, is in his spartan office on a sunny fall morning, ticking off the phone calls he has to make. "John Malone and Dob Bennett both called," Maffei reports, referring to the cable magnate and his right-hand man at Liberty Media. He also needs to catch up with Comcast President Brian Roberts, banker Nancy Peretsman of Allen & Co., and Joe Tucci, president of data-storage giant EMC.

One can't blame Maffei (pronounced ma-FAY) for reminding a visitor that he's a player. Less than a year ago he was chief financial officer at Microsoft, where he forged high-profile alliances with cable guys Malone and Roberts, and orchestrated deals with phone companies such as AT&T and Global Crossing. During Maffei's tenure as CFO, Microsoft's market capitalization soared from about $125 billion to $600 billion. Today he sits in temporary quarters in an unfashionable part of Seattle, charting a course for a little-known phone upstart that was once part of a Canadian construction concern.

Maffei, 40, picked an interesting time to abandon one of the world's leading technology companies and dive into telecom. With traffic over the Internet doubling every three months or so, demand for bandwidth is exploding, and telcos are looking for a way to carry that traffic anywhere. To help meet this demand, 360networks is building a massive fiber-optic network spanning the globe over land and under oceans. It will sell capacity on its system to other phone companies, Internet service providers, and corporations that need conduits to zap information around the world.

Maffei has lured plenty of smart money. Among the heavy hitters who have invested in 360networks since he signed on are Michael Dell, Nathan Myhrvold, John Malone (through Liberty Media), and Rupert Murdoch (through News Corp.). Though 360networks had only $234 million in revenue for the first six months of 2000, its market cap is $13 billion, a stunning testament to investors' willingness to bet on bandwidth.

The problem for Maffei is that 360networks isn't exactly alone. Global Crossing, Level 3 Communications, Flag Telecom, Williams Communications, and Tyco's TyCom Ltd. are also building global networks, along with older telcos like WorldCom. The boom has led some pundits to predict a bandwidth glut and left the industry divided on how much is enough. As a result, Maffei's new job has not been smooth sailing. An April IPO and high-yield offering raised slightly less money than expected. And 360networks' market cap, though large for a company with its revenue, has dropped about 30% from its recent high. Amazingly, that constitutes a decent performance in telecom this year; many companies have slipped 50% or more.

With his high-profile backers, though, the pressure on Maffei to do better is intense. Analysts credit the energetic--some would say hyper--Maffei with keeping 360networks on course in turbulent times. Some suggest it was his Street cred that got the 360networks IPO done in the first place. His high-tech pedigree has wowed investors and press in Canada, where the company has its headquarters. (In Seattle, where Maffei lives, 360networks has a corporate office.) He has used relationships forged in his Microsoft days to buy fiber capacity outside the U.S. Recently he has been wooing a major European partner. "These big companies never make any decisions quickly enough for us," he joked on the phone from London, where he was chatting up other potential customers and partners.

And there are always investors to educate and placate. Maffei views this as a competitive sport, especially because shareholders can take their money elsewhere. "I have to go and tell our story, because if I don't, [Level 3 CEO] Jim Crowe is going to tell his and suck all the oxygen out of the room," says Maffei, a big admirer of Crowe's. "He's already got his money, and he's shutting the door behind him."

Despite his relish for playing the financial game, Maffei didn't join 360networks to be a money guy or a deal guy. He wants to run a company and make his mark in the world. He is ambivalent about hiring a COO; he knows the company needs more bench strength, but he's enjoying the operational stuff himself. And when he talks about his hopes for 360networks, he doesn't go on about shareholder value or deals or the other things you'd expect from a numbers man. "There is absolutely a revolution occurring as we shift from a world of voice to data networks," he says. "Our goal is to be one of the really big players driving this data revolution."

Just a year ago, 360networks seemed an unlikely revolutionary. The company started out as unit of Ledcor, a contractor that dug trenches and laid fiber for phone companies, mostly in Canada. Like a number of other construction outfits, in the late 1990s Ledcor figured it could make money building and operating telecom networks itself and formed 360networks' predecessor company.

Right now, much of what 360networks does is heavy-duty, dirt-under-the-nails construction work. The company inherited a lot of Ledcor's expertise and a nifty plowing device that can dig a trench, lay a cable, and bury it in one continuous motion as it travels on a railroad track. If a train comes along, the crew can use special hydraulic lifts to raise the plow off the tracks and park it to the side until the train passes. Other construction companies often lose time rolling their plows to and from sidings. Maffei's company also saves money by swapping capacity on its networks for fiber in other parts of the world rather than building systems there itself.

But 360networks' biggest cost advantage may be its new-kid status. Maffei reckons that the company can buy the newest, most efficient optical gear to shoot bits and bytes around its networks. Bear Stearns analyst James Henry says such "next-generation" carriers can typically operate their networks for about 20% to 25% less than established long-distance companies. He adds, "That figure is probably a little understated when I look at what 360networks has done."

Maffei has to hope that the company's cost structure will help it survive if predictions of a capacity glut come true. To fill those brand-new, empty pipes with traffic, 360networks will have to steal business from its competitors, and to do so it is prepared to offer discounts. "We're the kind of company that causes disruptions in pricing," Maffei says. But deep discounting and cutthroat competition could ultimately turn long-haul fiber networks into an unattractive commodity business. Even if demand were to grow enough to soak up all the bandwidth, for now there may well be an excess of suppliers, all chasing the same business and undercutting one another in the process. Consider the consumer long-distance sector, which has seen prices--and margins--drop so dramatically that the two volume leaders, AT&T and WorldCom, reportedly want out of the business. Or the quickly eroding competitive local phone market, in which dozens of new carriers are trying to compete with the Baby Bells. "This is a competitive business," Maffei concedes, "but it's an emerging [one]. We'll make sure we win a share of that emerging business."

Maffei's path to 360networks was certainly circuitous. A New York native, he grew up in Massachusetts and graduated from Harvard Business School. He then worked as an associate for the old Dillon Read investment banking firm and later for Citicorp Venture Capital. He joined Microsoft in 1993 as a director of business development after serving as CFO of a struggling retail chain that Citicorp controlled as a result of a leveraged buyout. It didn't take him long to make an impression in Redmond. By 1997, at the ripe age of 36, he was named CFO. As interpreted by Maffei, the role was as much dealmaker as book balancer. Others began to notice the young executive, and in the spring of 1999 he was nearly hired as CEO of Road Runner, the cable-modem service of Time Warner (FORTUNE's parent) and MediaOne (now part of AT&T).

Microsoft is also an investor in Road Runner, and Bill Gates has some veto powers in the venture, which he used to block the hire, effectively keeping Maffei at Microsoft--for a while. Maffei says Gates' veto didn't create ill will between the two men, but the episode gave Maffei ideas. "I had never really thought about leaving," he says. "Then I got the bug to run something." His chance came a few months later. At a dinner celebrating the closing of AT&T's $5 billion investment in Microsoft, Donaldson Lufkin & Jenrette banker Jill Greenthal told Maffei about a Canadian fiber-optic company in need of a chief executive.

That Maffei was even considered reveals much about the telecom business. CFO Larry Olsen says that 360networks looked at a lot of candidates with traditional telco experience, including a few household names. But Maffei offered a more expansive, high-tech view of the world at a time when the stock market wasn't placing much of a premium on telecom experience. (Just compare 360networks' stock performance with its prospectus; in the section for risk factors, under the heading "Limited Experience," the company volunteers: "We have little experience in the offering of bandwidth and value-added network services, and this could increase our risk of failure.")

To the surprise of co-workers, Maffei has thrown himself into the minutiae of the phone business. His tough negotiating style has also won plaudits--at least from those on the same side of the table. "When he wants to be, he can be incredibly charming," says Olsen. "But then he'll make it clear that 'In three minutes we're going to get down to the deal, and I'm going to kick your ass.' He says it in such a way that you believe you may actually enjoy it when he does in fact kick your ass." As it happens, Maffei kicked a little ass when negotiating his package at 360networks. He arranged to acquire an 8% share of the company, pre-IPO, for $77.5 million; 360networks even loaned him the money to buy the stock. Today Maffei's shares are worth about $1 billion. (His ownership percentage has dropped to about 7.2% because the company issued more stock.)

Maffei and 360networks seem to have done well by each other so far. But a hard-charging, fiercely competitive guy like Maffei is unlikely to be satisfied running an obscure "carrier's carrier." Greenthal, the investment banker who helped recruit Maffei, believes that selling bandwidth is just a starting point. After all, why would strategic thinkers like Rupert Murdoch, Michael Dell, and John Malone invest in a company that does little more than provide dumb pipes for phone companies? "There's a reason that all of those people are attracted to Greg and to this business," Greenthal says. "He's building a platform"--one that would grab a large chunk of the world's data traffic and enrich these investors.

The big strategic question for Maffei is how 360networks will differentiate itself from the competition. Ehud Gelblum, a telecom analyst at CS First Boston, says the company's geographic reach would be almost unrivaled: "They have South America, Europe, and Asia, which would make the company attractive to a large global company that wants one-stop shopping for bandwidth." Maffei also hopes to avoid the commodity-bandwidth dogfight by creating sophisticated, higher-margin services for phone companies, Internet carriers, and certain kinds of corporate customers. The call to Joe Tucci, president of EMC, for example, relates to an idea Maffei has for linking Tucci's storage facilities with 360networks' transmission capacity. "This is an area where I could add value," Maffei says.

Maffei seems to have no regrets about his decision to leave Microsoft. He even seems unfazed by his rough ride in the telecom market, though his thoughts sometimes turn to the timing of 360networks' IPO in light of the current capital crunch on Wall Street. "If we had gone public earlier, we would have raised more capital because it was such easy money," he muses. But Maffei has shown a knack for timing in the past. Before leaving Microsoft he sold 275,000 of its shares for just over $90 a share. Today the stock is hovering around $60. A lot of Maffei's fellow players in both his new world and his old one are waiting to see if he picked the right time to get into telecom.