As filed with the Securities and Exchange Commission on May 10, 2004

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                                   (Mark One)

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2004

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

         For the transition period from            to

                           Commission File No. 0-5890

                                    GCI, INC.
             (Exact name of registrant as specified in its charter)

        STATE OF ALASKA                                          91-1820757
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

           2550 Denali Street
           Suite 1000
           Anchorage, Alaska                                        99503
(Address of principal executive offices)                          (Zip Code)

       Registrant's telephone number, including area code: (907) 868-5600


Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No  .

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No  .


                                       1
<PAGE>
<TABLE>
                                               GCI, INC.
                           A WHOLLY-OWNED SUBSIDIARY OF GENERAL COMMUNICATION, INC.

                                               FORM 10-Q

                                    FOR THE QUARTER ENDED MARCH 31, 2004

                                           TABLE OF CONTENTS
<CAPTION>
                                                                                                       Page No.
                                                                                                       -------
<S>                                                                                                       <C>
Cautionary Statement Regarding Forward-Looking Statements.................................................3

PART I.  FINANCIAL INFORMATION

         Item l.    Consolidated Balance Sheets as of March 31, 2004
                       (unaudited) and December 31, 2003..................................................6

                    Consolidated Statements of Income for the
                       three months ended March 31, 2004
                       (unaudited) and 2003 (unaudited)...................................................8

                    Consolidated Statements of Stockholder's Equity
                       for the three months ended March 31, 2004
                       (unaudited) and 2003 (unaudited)...................................................9

                    Consolidated Statements of Cash Flows for the three
                       months ended March 31, 2004 (unaudited)
                       and 2003 (unaudited)...............................................................10

                    Notes to Interim Condensed Consolidated Financial
                       Statements.........................................................................11

         Item 2.    Management's Discussion and Analysis of Financial
                    Condition and Results of Operations...................................................23

         Item 3.    Quantitative and Qualitative Disclosures About
                    Market Risk...........................................................................44

         Item 4.    Controls and Procedures...............................................................45

PART II.  OTHER INFORMATION

         Item 1.    Legal Proceedings.....................................................................45

         Item 6.    Exhibits and Reports on Form 8-K......................................................46

         Other items are omitted, as they are not applicable.

SIGNATURES................................................................................................47
</TABLE>

                                       2
<PAGE>
            Cautionary Statement Regarding Forward-Looking Statements


You should carefully review the information contained in this Quarterly Report,
but should particularly consider any risk factors that we set forth in this
Quarterly Report and in other reports or documents that we file from time to
time with the Securities and Exchange Commission ("SEC"). In this Quarterly
Report, in addition to historical information, we state our future strategies,
plans, objectives or goals and our beliefs of future events and of our future
operating results, financial position and cash flows. In some cases, you can
identify those so-called "forward-looking statements" by words such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "project," or "continue" or the negative of those words
and other comparable words. All forward-looking statements involve known and
unknown risks, uncertainties and other important factors that may cause our
actual results, performance, achievements, plans and objectives to differ
materially from any future results, performance, achievements, plans and
objectives expressed or implied by these forward-looking statements. In
evaluating those statements, you should specifically consider various factors,
including those outlined below. Those factors may cause our actual results to
differ materially from any of our forward-looking statements. For these
statements, we claim the protection of the safe harbor for forward-looking
statements provided by the Securities Reform Act. Such risks, uncertainties and
other factors include but are not limited to those identified below and those
further described in Part I, Item 1. Factors That May Affect Our Business and
Future Results of our December 31, 2003 Form 10-K.

     o   Material adverse changes in the economic conditions in the markets we
         serve and in general economic conditions, including the continuing
         impact of the following on the communications industry: high levels of
         competition in the long-distance market resulting in pressures to
         reduce prices; an oversupply of long-haul capacity; excessive debt
         loads; and several high-profile company failures and potentially
         fraudulent accounting practices by some companies;
     o   The efficacy of laws enacted by Congress and the State of Alaska
         legislature; rules and regulations to be adopted by the Federal
         Communications Commission ("FCC") and state public regulatory agencies
         to implement the provisions of the 1996 Telecom Act; the outcome of
         litigation relative thereto; and the impact of regulatory changes
         relating to access reform;
     o   Our responses to competitive products, services and pricing, including
         pricing pressures, technological developments, alternative routing
         developments, and the ability to offer combined service packages that
         include long-distance, local, cable and Internet services;
     o   The extent and pace at which different competitive environments develop
         for each segment of our business;
     o   The extent and duration for which competitors from each segment of the
         communications industries are able to offer combined or full service
         packages prior to our being able to do so;
     o   The degree to which we experience material competitive impacts to our
         traditional service offerings prior to achieving adequate local service
         entry;
     o   Competitor responses to our products and services and overall market
         acceptance of such products and services;
     o   The outcome of our negotiations with Incumbent Local Exchange Carriers
         ("ILECs") and state regulatory arbitrations and approvals with respect
         to interconnection agreements;

                                       3
<PAGE>
     o   Our ability to purchase network elements or wholesale services from
         ILECs at a price sufficient to permit the profitable offering of local
         telephone service at competitive rates;
     o   Success and market acceptance for new initiatives, many of which are
         untested;
     o   The level and timing of the growth and profitability of existing and
         new initiatives, particularly yellow page directories, local telephone
         services expansion including deploying digital local phone service
         ("DLPS") and wireless services;
     o   Start-up costs associated with entering new markets, including
         advertising and promotional efforts;
     o   Risks relating to the operations of new systems and technologies and
         applications to support new initiatives;
     o   Local conditions and obstacles;
     o   The impact on our industry and indirectly on us of oversupply of
         capacity resulting from excessive deployment of network capacity in
         certain markets we do not serve;
     o   Uncertainties inherent in new business strategies, new product launches
         and development plans, including local telephone services, wireless
         services, and yellow page directories, and the offering of these
         services in geographic areas with which we are unfamiliar;
     o   The risks associated with technological requirements, technology
         substitution and changes and other technological developments;
     o   Prolonged service interruptions which could affect our business;
     o   Development and financing of communications, local telephone, wireless,
         Internet and cable networks and services;
     o   Future financial performance, including the availability, terms and
         deployment of capital; the impact of regulatory and competitive
         developments on capital outlays, and the ability to achieve cost
         savings and realize productivity improvements and the consequences of
         increased leverage;
     o   Availability of qualified personnel;
     o   Changes in, or failure, or inability, to comply with, government
         regulations, including, without limitation, regulations of the FCC, the
         Regulatory Commission of Alaska ("RCA"), and adverse outcomes from
         regulatory proceedings;
     o   Changes in regulations governing unbundled network elements ("UNEs");
     o   Uncertainties in federal military spending levels and military base
         closures in markets in which we operate;
     o   The ongoing global and domestic trend towards consolidation in the
         communications industry, which may result in our competitors being
         larger and better financed, and provide these competitors with
         extensive resources and greater geographic reach, allowing them to
         compete more effectively;
     o   Any continuing financial, credit and economic impacts of the MCI, Inc.
         ("MCI") bankruptcy filing on the industry in general and on us in
         particular;
     o   The success of MCI's emergence from bankruptcy protection,
     o   A migration of MCI's or Sprint's traffic off our network without it
         being replaced by other common carriers that interconnect with our
         network;
     o   The effect on us of pricing pressures, new program offerings and market
         consolidation in the markets served by our significant customers, MCI
         and Sprint Corporation ("Sprint");
     o   The effect on us of industry consolidation including the potential
         acquisition of one or more of our large wholesale customers by a
         company with commercial relationships with other providers;

                                       4
<PAGE>
     o   Under Statement of Financial Accounting Standard ("SFAS") 142, we must
         test our intangibles for impairment at least annually, which may result
         in a material, non-cash write-down of our cable certificates or
         goodwill and could have a material adverse impact on our financial
         position, results of operations or liquidity; and
     o   Other risks detailed from time to time in our periodic reports filed
         with the SEC.

You should not place undue reliance on any such forward-looking statements.
Further, any forward-looking statement, and such risks, uncertainties and other
factors speak only as of the date on which they were originally made and we
expressly disclaim any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement to reflect any change in our
expectations with regard to those statements or any other change in events,
conditions or circumstances on which any such statement is based, except as
required by law. New factors emerge from time to time, and it is not possible
for us to predict what factors will arise or when. In addition, we cannot assess
the impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

                                       5
<PAGE>
PART I.  FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
                                            GCI, INC. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Amounts in thousands)                                                                         (Unaudited)
                                                                                                March 31,       December 31,
                            ASSETS                                                                2004              2003
---------------------------------------------------------------------------------------    ----------------- -----------------
<S>                                                                                       <C>                     <C>
Current assets:
  Cash and cash equivalents                                                               $      10,841            10,435
                                                                                           ----------------- -----------------

  Receivables                                                                                    64,089            70,235
  Less allowance for doubtful receivables                                                         2,018             1,954
                                                                                           ----------------- -----------------
     Net receivables                                                                             62,071            68,281

  Deferred income taxes, net                                                                      6,726             7,195
  Prepaid and other current assets                                                                6,257            12,159
  Notes receivable from related parties                                                           1,673             1,885
  Property held for sale                                                                          1,176             2,173
  Inventories                                                                                       984             1,513
                                                                                           ----------------- -----------------
     Total current assets                                                                        89,728           103,641
                                                                                           ----------------- -----------------

Property and equipment in service, net of depreciation                                          360,361           369,039
Construction in progress                                                                         51,802            33,618
                                                                                           ----------------- -----------------
     Net property and equipment                                                                 412,163           402,657
                                                                                           ----------------- -----------------

Cable certificates                                                                              191,241           191,241
Goodwill                                                                                         41,972            41,972
Other intangible assets, net of amortization of $1,815 and $1,656 at March 31, 2004
  and December 31, 2003, respectively                                                             4,136             3,895
Deferred loan and senior notes costs, net of amortization of $1,438 and $5,308 at
  March 31, 2004 and December 31, 2003, respectively                                              9,559             5,757
Notes receivable from related parties                                                             3,903             3,443
Other assets                                                                                      9,147             9,576
                                                                                           ----------------- -----------------
     Total other assets                                                                         259,958           255,884
                                                                                           ----------------- -----------------
       Total assets                                                                       $     761,849           763,020
                                                                                           ================= =================

See accompanying notes to interim condensed consolidated financial statements.
</TABLE>
                                       6                             (Continued)
<PAGE>
<TABLE>
                                            GCI, INC. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
                                                  (Continued)
<CAPTION>
(Amounts in thousands)                                                                    (Unaudited)
                                                                                           March 31,       December 31,
  LIABILITIES AND STOCKHOLDER'S EQUITY                                                       2004              2003
----------------------------------------------------------------------------------    ----------------- ----------------
<S>                                                                                  <C>                     <C>
Current liabilities:
  Current maturities of obligations under capital leases                             $       6,293             5,139
  Accounts payable                                                                          23,571            34,133
  Deferred revenue                                                                          14,736            21,275
  Accrued payroll and payroll related obligations                                           14,311            17,545
  Due to related party                                                                       7,120             6,258
  Accrued liabilities                                                                        6,811             7,933
  Accrued interest                                                                           2,920             8,645
  Subscriber deposits                                                                          577               651
                                                                                      ----------------- ----------------
    Total current liabilities                                                               76,339           101,579

Long-term debt                                                                             366,912           345,000
Obligations under capital leases, excluding current maturities                              37,378            38,959
Obligation under capital lease due to related party, excluding current maturity                695               677
Deferred income taxes, net of deferred income tax benefit                                   24,805            24,168
Other liabilities                                                                            6,507             6,366
                                                                                      ----------------- ----------------
    Total liabilities                                                                      512,636           516,749
                                                                                      ----------------- ----------------
Stockholder's equity:
 Class A common stock.  Authorized 10 shares; issued 0.01 shares at March 31,
  2004 and December 31, 2003                                                               206,622           206,622
 Paid-in capital                                                                            45,826            44,904
 Retained deficit                                                                           (3,022)           (4,947)
 Accumulated other comprehensive loss                                                         (213)             (308)
                                                                                      ----------------- -----------------

    Total stockholder's equity                                                             249,213           246,271
                                                                                      ----------------- -----------------
Commitments and contingencies

    Total liabilities and stockholder's equity                                       $     761,849           763,020
                                                                                      ================= =================
See accompanying notes to interim condensed consolidated financial statements.
</TABLE>

                                       7
<PAGE>
<TABLE>
                                         GCI, INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF INCOME
                                               (Unaudited)
<CAPTION>
                                                                                               Three Months Ended
                                                                                                    March 31,
(Amounts in thousands)                                                                       2004               2003
                                                                                      ----------------- -----------------
<S>                                                                                  <C>                      <C>
Revenues                                                                             $     108,916             92,777

Cost of sales and services                                                                  38,745             30,248
Selling, general and administrative expenses                                                35,404             32,993
Bad debt expense (recovery)                                                                   (397)               597
Depreciation, amortization and accretion expense                                            15,758             13,501
                                                                                      ----------------- -----------------
     Operating income                                                                       19,406             15,438
                                                                                      ----------------- -----------------
Other income (expense):
   Interest expense                                                                         (7,517)            (9,154)
   Loss on early extinguishment of debt                                                     (6,136)               ---
   Amortization and write-off of loan and senior notes fees                                 (2,627)            (1,073)
   Interest income                                                                             108                166
                                                                                      ----------------- -----------------
     Other expense, net                                                                    (16,172)           (10,061)
                                                                                      ----------------- -----------------
     Net income before income taxes and cumulative effect of a change in
       accounting principle                                                                  3,234              5,377

Income tax expense                                                                           1,309              2,282
                                                                                      ----------------- -----------------
     Net income before cumulative effect of a change in accounting principle                 1,925              3,095

Cumulative effect of a change in accounting principle, net of income tax benefit
   of $367                                                                                     ---               (544)
                                                                                      ----------------- -----------------
     Net income                                                                      $       1,925              2,551
                                                                                      ================= =================

See accompanying notes to interim condensed consolidated financial statements.
</TABLE>

                                       8
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                                          THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                                      (Unaudited)
<CAPTION>
                                                        Shares of                                         Accumulated
                                                         Class A      Class A                                Other
                                                         Common        Common      Paid-in   Retained    Comprehensive
(Amounts in thousands, except share amounts)              Stock        Stock       Capital    Deficit    Income (Loss)      Total
                                                       -----------------------------------------------------------------------------
<S>                                                        <C>      <C>             <C>       <C>            <C>           <C>
Balances at December 31, 2002                              100      $ 206,622       44,904    (20,489)       (540)         230,497
Components of comprehensive income:
  Net income                                               ---            ---          ---      2,551         ---            2,551
  Change in fair value of cash flow hedge, net of
     change in income tax benefit of $70                   ---            ---          ---        ---         (38)             (38)
                                                                                                                         -----------
      Comprehensive income                                                                                                   2,513
Contribution from General Communication, Inc.              ---            ---        1,348        ---         ---            1,348
                                                       -----------------------------------------------------------------------------
Balances at March 31, 2003                                 100      $ 206,622       46,252    (17,938)       (578)         234,358
                                                       =============================================================================

Balances at December 31, 2003                              100      $ 206,622       44,904     (4,947)       (308)         246,271
  Net income                                               ---            ---          ---      1,925         ---            1,925
  Change in fair value of cash flow hedge, net of
     change in income tax effect of $58                    ---            ---          ---        ---          95               95
                                                                                                                         -----------
      Comprehensive income                                                                                                   2,020
Contribution from General Communication, Inc.              ---            ---          922        ---         ---              922
                                                       -----------------------------------------------------------------------------
Balances at March 31, 2004                                 100      $ 206,622       45,826     (3,022)       (213)         249,213
                                                       =============================================================================

 See accompanying notes to interim condensed consolidated financial statements.
</TABLE>
                                       9
<PAGE>
<TABLE>
                                            GCI, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     THREE MONTHS ended MARCH 31, 2004 AND 2003
                                                   (Unaudited)
<CAPTION>
(Amounts in thousands)                                                                       2004            2003
                                                                                      --------------    -------------
<S>                                                                                  <C>                    <C>
Cash flows from operating activities:
   Net income                                                                        $       1,925           2,551
   Adjustments to reconcile net income to net cash provided by operating
     activities:
     Depreciation, amortization and accretion expense                                       15,758          13,501
     Loss on early extinguishment of debt                                                    6,136             ---
     Deferred income tax expense                                                             1,309           2,282
     Amortization of loan and senior notes fees                                              2,627           1,073
     Compensatory stock options                                                                 77             114
     Bad debt expense (recovery), net of write-offs                                             64             (81)
     Deferred compensation                                                                     127             133
     Cumulative effect of a change in accounting principle, net                                ---             544
     Other noncash income and expense items                                                    311            (118)
     Change in operating assets and liabilities                                            (13,559)         (5,651)
                                                                                      --------------    -------------
       Net cash provided by operating activities                                            14,775          14,348
                                                                                      --------------    -------------

Cash flows from investing activities:
   Purchases of property and equipment, including construction period interest             (25,201)         (6,474)
   Proceeds from sales of assets                                                               859             ---
   Purchases of other assets and intangible assets                                            (672)           (922)
   Refund of deposit                                                                           699             ---
   Payments received on notes receivable from related parties                                  662              22
   Additions to property held for sale                                                         (81)            ---
   Notes receivable issued to related parties                                                  ---             (22)
                                                                                      --------------    -------------
       Net cash used in investing activities                                               (23,734)         (7,396)
                                                                                      --------------    -------------

Cash flows from financing activities:
   Issuance of new Senior Notes                                                            245,720             ---
   Repayment of old Senior Notes                                                          (180,000)            ---
   Borrowing on new Senior Credit Facility                                                  10,000             ---
   Repayment of new Senior Credit Facility                                                 (53,832)            ---
   Repayments of capital lease obligations                                                    (409)           (478)
   Payment of debt issuance costs                                                           (6,429)            (12)
   Payment of bond call premiums                                                            (6,136)            ---
   Contribution (to) from General Communication, Inc.                                          451            (229)
                                                                                      --------------    -------------
       Net cash provided by (used in) financing activities                                   9,365            (719)
                                                                                      --------------    -------------
       Net increase in cash and cash equivalents                                               406           6,233
       Cash and cash equivalents at beginning of period                                     10,435          11,940
                                                                                      --------------    -------------

       Cash and cash equivalents at end of period                                   $       10,841          18,173
                                                                                      ==============    =============

See accompanying notes to interim condensed consolidated financial statements.
</TABLE>

                                       10
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

The accompanying unaudited interim condensed consolidated financial statements
include the accounts of GCI, Inc. and its subsidiaries and have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. They should be read in
conjunction with our audited consolidated financial statements for the year
ended December 31, 2003, filed as part of our annual report on Form 10-K. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The results of
operations for interim periods are not necessarily indicative of the results
that may be expected for an entire year or any other period.

(l)    Business and Summary of Significant Accounting Principles

       In the following discussion, GCI, Inc. and its direct and indirect
       subsidiaries are referred to as "we," "us" and "our".

       Basis of Presentation
       We were incorporated in Alaska in 1997 to effect the issuance of senior
       notes. As a wholly-owned subsidiary of General Communication, Inc.
       ("GCI"), we received through our initial capitalization all ownership
       interests in subsidiaries previously held by GCI.

       (a)   Business
             We offer the following services:
             o   Long-distance telephone service between Alaska and the
                 remaining United States and foreign countries,
             o   Cable television services throughout Alaska,
             o   Facilities-based competitive local access services in
                 Anchorage, Fairbanks and Juneau, Alaska,
             o   Internet access services,
             o   Termination of traffic in Alaska for certain common carriers,
             o   Private Line and private network services,
             o   Managed services to certain commercial customers,
             o   Broadband services, including our SchoolAccess(TM) offering to
                 rural school districts and a similar offering to rural
                 hospitals and health clinics,
             o   Sales and service of dedicated communications systems and
                 related equipment,
             o   Lease and sales of capacity on an undersea fiber optic cable
                 system used in the transmission of interstate and intrastate
                 Private Line, switched message long-distance and Internet
                 services between Alaska and the remaining United States and
                 foreign countries, and
             o   Distribution of a white and yellow pages directory to
                 residential and business customers in Anchorage and an on-line
                 directory product

       (b)   Principles of Consolidation
             The consolidated financial statements include the consolidated
             accounts of GCI, Inc. and its wholly owned subsidiaries with all
             significant intercompany transactions eliminated.

                                       11                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

       (c)   Earnings per Share and Common Stock
             We are a wholly owned subsidiary of GCI and, accordingly, are not
             required to present earnings per share. Our common stock is not
             publicly traded.

       (d)   Asset Retirement Obligations
             Upon adoption of SFAS No. 143, "Accounting for Asset Retirement
             Obligations," we recorded the cumulative effect of accretion and
             depreciation expense as a cumulative effect of a change in
             accounting principle of approximately $544,000, net of income tax
             benefit of $367,000, during the three months ended March 31, 2003.

             Following is a reconciliation of the beginning and ending aggregate
             carrying amount of our asset retirement obligations at March 31,
             2004 and 2003 (amounts in thousands):

                    Balance at December 31, 2002                    $    ---
                    Liability recognized upon adoption of SFAS
                      No. 143                                          1,565
                    Accretion expense for the three months
                      ended March 31, 2003                               128
                                                                     --------
                         Balance at March 31, 2003                  $  1,693
                                                                     ========

                    Balance at December 31, 2003                    $  2,005
                    Accretion expense for the three months ended
                      March 31, 2004                                      43
                    Other                                                (11)
                                                                     --------
                         Balance at March 31, 2004                  $  2,037
                                                                     ========

       (e)   Stock Option Plan
             At March 31, 2004, we had one stock-based employee compensation
             plan. We account for this plan under the recognition and
             measurement principles of Accounting Principles Board ("APB")
             Opinion No. 25, "Accounting for Stock Issued to Employees," and
             related interpretations. We use the intrinsic-value method and
             compensation expense is recorded on the date of grant only if the
             current market price of the underlying stock exceeds the exercise
             price. We have adopted SFAS No. 123, "Accounting for Stock-Based
             Compensation," and SFAS No. 148, "Accounting for Stock-Based
             Compensation-Transition and Disclosure." We have elected to
             continue to apply the provisions of APB Opinion No. 25 and provide
             the pro forma disclosure as required by SFAS No. 148.

                                       12                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

             Stock-based employee compensation cost is reflected over the
             options' vesting period of generally five years and compensation
             cost for options granted prior to January 1, 1996 is not
             considered. The following table illustrates the effect on net
             income for the three months ended March 31, 2004 and 2003, if we
             had applied the fair-value recognition provisions of SFAS No. 123
             to stock-based employee compensation (amounts in thousands):
<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                                           March 31,
                                                                                    ------------------------
                                                                                       2004          2003
                                                                                    ----------    ----------
                <S>                                                                <C>               <C>
                Net income, as reported                                            $   1,925         2,551
                Total stock-based employee compensation expense included in
                  reported net income, net of related tax effects                         45            23
                Total stock-based employee compensation expense under the
                  fair-value based method for all awards, net of related tax
                  effects                                                               (523)         (474)
                                                                                    ----------    ----------
                Pro forma net income                                               $   1,447         2,100
                                                                                    ==========    ==========
</TABLE>
             The calculation of total stock-based employee compensation expense
             under the fair-value based method includes weighted-average
             assumptions of a risk-free interest rate, volatility and an
             expected life.

       (f)   Variable Interest Entities
             In December 2003, the Financial Accounting Standards Board ("FASB")
             issued FASB Interpretation No. ("FIN") 46 (revised December 2003),
             "Consolidation of Variable Interest Entities," which addresses how
             a business enterprise should evaluate whether it has a controlling
             financial interest in an entity through means other than voting
             rights and accordingly should consolidate the entity. FIN 46R,
             which was issued in January 2003, replaces FIN 46. We will be
             required to apply FIN 46R to variable interests in Variable
             Interest Entities ("VIEs") created after December 31, 2003. For
             variable interests in VIEs created before January 1, 2004, the
             Interpretation will be applied beginning on January 1, 2005. For
             any VIEs that must be consolidated under FIN 46R that were created
             before January 1, 2004, the assets, liabilities and non-controlling
             interests of the VIE initially would be measured at their carrying
             amounts with any difference between the net amount added to the
             balance sheet and any previously recognized interest being
             recognized as the cumulative effect of an accounting change. If
             determining the carrying amounts is not practicable, fair value at
             the date FIN 46R first applies may be used to measure the assets,
             liabilities and non-controlling interest of the VIE. At December
             31, 2003, we did not have VIEs. Adoption of this statement on
             January 1, 2004 did not have a material effect on our results of
             operations, financial position and cash flows.

       (g)   Reclassifications
             Reclassifications have been made to the 2003 financial statements
             to make them comparable with the 2004 presentation.

                                       13                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

(2)    Consolidated Statements of Cash Flows Supplemental Disclosures
       Changes in operating assets and liabilities consist of (amounts in
       thousands):
<TABLE>
<CAPTION>
             Three month periods ended March 31,                               2004           2003
                                                                           ------------   ------------
              <S>                                                         <C>               <C>
              Decrease in accounts receivable                             $    6,146         5,066
              (Increase) decrease in inventories                                 529          (688)
              Decrease in prepaid and other current assets                     5,902           630
              Decrease in accounts payable                                   (10,562)       (6,075)
              Decrease in deferred revenues                                   (6,539)       (1,662)
              Increase (decrease) in accrued payroll and payroll
               related obligations                                            (3,234)        1,002
              Decrease in accrued interest                                    (5,725)       (3,119)
              Increase in due to related party                                 1,012           ---
              Decrease in accrued liabilities                                   (985)         (752)
              Decrease in subscriber deposits                                    (74)          (64)
              Decrease in components of other long-term liabilities              (29)           12
                                                                           ------------   ------------
                                                                          $  (13,559)       (5,651)
                                                                           ============   ============
</TABLE>
       We paid interest totaling approximately $13,658,000 and $12,273,000
       during the three months ended March 31, 2004 and 2003, respectively.

(3)    Intangible Assets
       Cable certificates are allocated to our cable services segment. Goodwill
       is primarily allocated to the cable services segment and the remaining
       amount is not allocated to a reportable segment, but is included in the
       All Other category as described in note 6.

       Amortization expense for amortizable intangible assets was $159,000 and
       $173,000 during the three months ended March 31, 2004 and 2003,
       respectively.

       Amortization expense for amortizable intangible assets for each of the
       five succeeding fiscal years is estimated to be (amounts in thousands):

                 Years Ending
                 December 31,
                --------------
                   2004        $ 712
                   2005          595
                   2006          590
                   2007          529
                   2008          279

       No indicators of impairment have occurred since the impairment testing
       was performed as of December 31, 2003.

                                       14                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

(4)    MCI Settlement and Release Agreement
       On July 21, 2002 MCI and substantially all of its active United States
       subsidiaries filed voluntary petitions for reorganization under Chapter
       11 of the United States Bankruptcy Code in the United States Bankruptcy
       Court. On July 22, 2003, the United States Bankruptcy Court approved a
       settlement agreement for pre-petition amounts owed to us by MCI and
       affirmed all of our existing contracts with MCI. The remaining
       pre-petition accounts receivable balance owed by MCI to us after this
       settlement was $11.1 million ("MCI credit") which we have used and will
       continue to use as a credit against amounts payable for services
       purchased from MCI.

       After settlement, we began reducing the MCI credit as we utilized it for
       services otherwise payable to MCI. The use of the credit is recorded as a
       reduction of bad debt expense. During the three months ended March 31,
       2004 and 2003 we realized approximately $1.2 million and $0,
       respectively, of the MCI credit against amounts payable for services
       received from MCI.

       The remaining unused MCI credit totaled $6.7 million and $7.9 million at
       March 31, 2004 and December 31, 2003, respectively. The credit balance is
       not recorded on the Consolidated Balance Sheet as we are recognizing
       recovery of bad debt expense as the credit is realized. We have accounted
       for our use of the MCI credit as a gain contingency, and, accordingly,
       will recognize a reduction of bad debt expense as services are provided
       by MCI and the credit is realized. MCI emerged from bankruptcy protection
       in April 2004; see note 8.

(5)    Long-term Debt
       Draw on New Senior Credit Facility
       In January 2004 we drew $10.0 million under the revolving credit portion
       of our new Senior Credit Facility. The draw was re-paid in February 2004
       from proceeds of our new Senior Notes offering discussed below.

       Senior Notes Refinancing
       In February 2004 GCI, Inc. sold $250 million in aggregate principal
       amount of senior debt securities due in 2014 ("new Senior Notes"). The
       new Senior Notes are an unsecured senior obligation. We pay interest of
       7.25% on the new Senior Notes. The new Senior Notes were sold at a
       discount of $4.3 million. The Senior Notes are carried on our
       Consolidated Balance Sheet net of the unamortized portion of the
       discount, which is being amortized to Interest Expense over the life of
       the new Senior Notes.

       The net proceeds of the offering were primarily used to repay our
       existing $180.0 million 9.75% Senior Notes ("old Senior Notes") and to
       repay approximately $43.8 million of the term portion and $10.0 million
       of the revolving portion of our new Senior Credit Facility. Semi-annual
       interest payments of approximately $9.1 million will be due beginning
       August 15, 2004. In connection with the issuance, we paid fees and other
       expenses of approximately $6.3 million which are being amortized over the
       life of the new Senior Notes.

       The new Senior Notes were offered only to qualified institutional buyers
       pursuant to exemptions from registration under the Securities Act. The
       new Senior Notes have not been registered under the Securities Act and,
       unless so registered, may not be offered or sold except pursuant to an
       exemption from, or in a transaction not subject to, the registration
       requirements of the Securities

                                       15                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

       Act and applicable state securities laws. We plan to register our new
       Senior Notes during the second quarter of 2004.

       The new Senior Notes are not redeemable prior to February 15, 2009. At
       any time on or after February 15, 2009, the new Senior Notes are
       redeemable at our option, in whole or in part, on not less than thirty
       days nor more than sixty days notice, at the following redemption prices,
       plus accrued and unpaid interest (if any) to the date of redemption:

          If redeemed during the twelve month period
          commencing February 1 of the year indicated:         Redemption Price
          ---------------------------------------------------- -----------------
          2009                                                     103.625%
          2010                                                     102.417%
          2011                                                     101.208%
          2012 and thereafter                                      100.000%

        We may, on or prior to February 17, 2007, at our option, use the net
        cash proceeds of one or more underwritten public offerings of our
        qualified stock to redeem up to a maximum of 35% of the initially
        outstanding aggregate principal amount of our new Senior Notes at a
        redemption price equal to 107.25% of the principal amount of the new
        Senior Notes, together with accrued and unpaid interest, if any, thereon
        to the date of redemption, provided that not less than 65% of the
        principal amount of the new Senior Notes originally issued remain
        outstanding following such a redemption.

        The new Senior Notes restrict GCI, Inc. and certain of its subsidiaries
        from incurring debt in most circumstances unless the result of incurring
        debt does not cause our leverage ratio to exceed 6.0 to one. The new
        Senior Notes do not allow debt under the new Senior Credit Facility to
        exceed the greater of (and reduced by certain stated items):

          o   $250 million, reduced by the amount of any prepayments, or
          o   3.0 times earnings before interest, taxes, depreciation and
              amortization for the last four full fiscal quarters of GCI, Inc.
              and certain of its subsidiaries.

       The new Senior Notes limit our ability to make cash dividend payments.

       We conducted a Consent Solicitation and Tender Offer for the old Senior
       Notes. Through February 13, 2004 we accepted for payment $114.6 million
       principal amount of notes which were validly tendered. Such notes
       accepted for payment received additional consideration as follows:

          o   $4.0 million based upon a payment of $1,035 per $1,000 principal
              amount, consisting of the purchase price of $1,025 per $1,000
              principal amount and the consent payment of $10 per $1,000
              principal amount, and
          o   $497,000 in accrued and unpaid interest through February 16, 2004.

                                       16                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

       The remaining principal amount of $65.4 million was redeemed on March 18,
       2004 for additional consideration as follows:

          o   $2.1 million based upon a payment of $1,032.50 per $1,000
              principal amount, and
          o   $833,000 in accrued and unpaid interest through March 18, 2004.

       The total redemption cost was $186.1 million. The premium to redeem our
       old Senior Notes was $6.1 million (excluding interest cost of $1.3
       million) and was recognized as a component of Other Income (Expense)
       during the three months ended March 31, 2004.

       Compliance with the redemption notice requirements in the Indenture
       resulted in a delay before final payment of some of the old Senior Notes.
       As a result of such delay, our total debt increased during the overlap
       period between the redemption of the old Senior Notes and the issuance of
       the new Senior Notes making us out of compliance with Section 6.11 of our
       Credit, Guaranty, Security and Pledge Agreement, dated as of October 30,
       2003. We received a waiver from compliance with Section 6.11 until April
       30, 2004. After the final redemption payment on March 18, 2004 we were in
       compliance with Section 6.11.

(6)    Industry Segments Data
       Our reportable segments are business units that offer different products.
       The reportable segments are each managed separately and offer distinct
       products with different production and delivery processes.

       We have four reportable segments as follows:

         Long-distance services. We offer a full range of common carrier
         long-distance services to commercial, government, other
         telecommunications companies and residential customers, through our
         networks of fiber optic cables, digital microwave, and fixed and
         transportable satellite earth stations and our SchoolAccess(TM)
         offering to rural school districts and a similar offering to rural
         hospitals and health clinics.

         Cable services. We provide cable television services to residential,
         commercial and government users in the State of Alaska. Our cable
         systems serve 35 communities and areas in Alaska, including the state's
         four largest urban areas, Anchorage, Fairbanks, the Matanuska-Susitna
         Valley, and Juneau. We offer digital cable television services in
         Anchorage, the Matanuska-Susitna Valley, Fairbanks, Juneau, Ketchikan,
         Kenai and Soldotna and retail cable modem service (through our Internet
         services segment) in all of our locations in Alaska except Kotzebue.

         Local access services. We offer facilities based competitive local
         exchange services in Anchorage, Fairbanks and Juneau and plan to
         provide similar competitive local exchange services in other locations
         pending regulatory approval and subject to availability of capital.
         Revenue, costs of sales and service and operating expenses for our new
         phone directory are included in the local access services segment.

         Internet services. We offer wholesale and retail Internet services to
         both consumer and commercial customers. We offer cable modem service as
         further described in Cable services

                                       17                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

         above. Our undersea fiber optic cable system allows us to offer
         enhanced services with high-bandwidth requirements.

       Included in the "All Other" category in the tables that follow are our
       managed services, product sales and cellular telephone services. None of
       these business units has ever met the quantitative thresholds for
       determining reportable segments. Also included in the All Other category
       are corporate related expenses including information technology,
       accounting, legal and regulatory, human resources and other general and
       administrative expenses.

       We evaluate performance and allocate resources based on (1) earnings or
       loss from operations before depreciation, amortization and accretion
       expense, net other expense and income taxes, and (2) operating income or
       loss. The accounting policies of the reportable segments are the same as
       those described in the summary of significant accounting policies in note
       1. Intersegment sales are recorded at cost plus an agreed upon
       intercompany profit.

       We earn all revenues through sales of services and products within the
       United States. All of our long-lived assets are located within the United
       States of America, except approximately 84% of our undersea fiber optic
       cable system which transits international waters.

       Summarized financial information for our reportable segments for the
       three months ended March 31, 2004 and 2003 follows (amounts in
       thousands):
<TABLE>
<CAPTION>
                                                       Reportable Segments
                                     ---------------------------------------------------------
                                        Long-               Local                  Total
                                       Distance     Cable   Access  Internet     Reportable      All
                                       Services   Services Services Services      Segments      Other      Total
                                     -------------------------------------------------------------------------------
                                     <S>           <C>      <C>       <C>         <C>          <C>        <C>
               2004
               ----
       Revenues:
         Intersegment                $   3,434        617    2,340      926         7,317          186      7,503
         External                       51,896     24,852   11,792    6,406        94,946       13,970    108,916
                                     -------------------------------------------------------------------------------
            Total revenues           $  55,330     25,469   14,132    7,332       102,263       14,156    116,419
                                     ===============================================================================

       Earnings (loss) from
         operations before
         depreciation,
         amortization, accretion,
         net interest expense and
         income taxes                $  26,733     11,645    2,314    1,723        42,415      (12,609)    29,806
                                     ===============================================================================

       Operating income (loss)       $  19,811      6,966    1,422      799        28,998       (8,814)    20,184
                                     ===============================================================================
</TABLE>
                                       18                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       Reportable Segments
                                     ---------------------------------------------------------
                                        Long-               Local                  Total
                                       Distance     Cable   Access  Internet     Reportable      All
                                       Services   Services Services Services      Segments      Other      Total
                                     -------------------------------------------------------------------------------
                                     <S>           <C>      <C>      <C>           <C>         <C>        <C>
               2003
               ----
       Revenues:
         Intersegment                $   3,603        636    2,623    3,074         9,936          186     10,122
         External                       48,486     23,438    8,426    4,590        84,940        7,837     92,777
                                     -------------------------------------------------------------------------------
            Total revenues           $  52,089     24,074   11,049    7,664        94,876        8,023    102,899
                                     ===============================================================================

       Earnings (loss) from
         operations before
         depreciation,
         amortization, accretion,
         net interest expense and
         income taxes                $  25,600     11,219      841      454        38,114       (8,550)    29,564
                                     ===============================================================================

       Operating income (loss)       $  21,161      6,453      374   (1,395)       26,593      (10,530)    16,063
                                     ===============================================================================
</TABLE>
       A reconciliation of reportable segment revenues to consolidated revenues
       follows (amounts in thousands):
<TABLE>
<CAPTION>
         Three months ended March 31,                                             2004           2003
                                                                            --------------- -------------
         <S>                                                               <C>                  <C>
         Reportable segment revenues                                       $    102,263         94,876
         Plus All Other revenues                                                 14,156          8,023
         Less intersegment revenues eliminated in consolidation                   7,503         10,122
                                                                            --------------- -------------
              Consolidated revenues                                        $    108,916         92,777
                                                                            =============== =============
</TABLE>
                                       19                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

       A reconciliation of reportable segment earnings from operations before
       depreciation, amortization and accretion expense, net other expense and
       income taxes to consolidated net income before income taxes and
       cumulative effect of a change in accounting principle follows (amounts in
       thousands):
<TABLE>
<CAPTION>
         Three months ended March 31,                                             2004           2003
                                                                            -------------- --------------
         <S>                                                               <C>                  <C>
         Reportable segment earnings from operations before
           depreciation, amortization and accretion expense, net other
           expense and income taxes                                        $     42,415         38,114
         Less All Other loss from operations before depreciation,
           amortization and accretion expense, net other expense and
           income taxes                                                          12,609          8,550
         Less intersegment contribution eliminated in consolidation                 778            625
                                                                            -------------- --------------
              Consolidated earnings from operations before
                depreciation, amortization and accretion expense, net
                other expense and income taxes                                   29,028         28,939
         Less depreciation, amortization and accretion expense                   15,758         13,501
         Add loss on early extinguishment of debt                                 6,136            ---
                                                                            -------------- --------------
              Consolidated operating income                                      19,406         15,438
         Less other expense, net                                                 16,172         10,061
                                                                            -------------- --------------
              Consolidated net income before income taxes and
                cumulative effect of a change in accounting principle      $      3,234          5,377
                                                                            ============== ==============
</TABLE>
       A reconciliation of reportable segment operating income to consolidated
       net income before income taxes and cumulative effect of a change in
       accounting principle follows (amounts in thousands):
<TABLE>
<CAPTION>
         Three months ended March 31,                                             2004           2003
                                                                            --------------- -------------
         <S>                                                               <C>                  <C>
         Reportable segment operating income                               $     28,998         26,593
         Less All Other operating loss                                            8,814         10,530
         Less intersegment contribution eliminated in consolidation                 778            625
                                                                            --------------- -------------
              Consolidated operating income                                      19,406         15,438
         Less other expense, net                                                 16,172         10,061
                                                                            --------------- -------------
              Consolidated net income before income taxes and cumulative
                effect of a change in accounting principle                 $      3,234          5,377
                                                                            =============== =============
</TABLE>
(7)    Commitments and Contingencies

       Litigation and Disputes
       We are routinely involved in various lawsuits, billing disputes, legal
       proceedings and regulatory matters that have arisen in the normal course
       of business. While the ultimate results of these

                                       20                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

       items cannot be predicted with certainty we do not expect at this time
       the resolution of them to have a material adverse effect on our financial
       position, results of operations or liquidity.

       Fiber Optic Cable System Construction Commitment
       In June 2003 we began work on the construction of a fiber optic cable
       system connecting Seward, Alaska and Warrenton, Oregon, with leased
       backhaul facilities to connect it to our switching and distribution
       centers in Anchorage, Alaska and Seattle, Washington ("AU West"). A
       consortium of companies was selected to design, engineer, manufacture and
       install the undersea fiber optic cable system and a contract has been
       signed at a total cost to us of $35.2 million. From inception through
       March 31, 2004 our capital expenditures for this project have totaled
       approximately $28.4 million, most of which have been funded through our
       operating cash flows and are classified as Construction in Progress in
       our Consolidated Balance Sheets. We expect to fund the remaining
       construction costs of the fiber optic cable system through our operating
       cash flows and, to the extent necessary, with draws on our new Senior
       Credit Facility. We expect to place AULP West into service during the
       second quarter of 2004.

       Fiber Optic Cable System Repair
       Our undersea fiber optic cable system connecting Whittier, Valdez and
       Juneau, Alaska and Seattle, Washington ("AULP East") began experiencing
       powering irregularities during the first quarter of 2004. We expect to
       repair AU East after AULP West is placed into service without any
       significant service disruption. Depending on the nature of the
       malfunction and the necessary corrective action, repair costs are
       expected to range between $225,000 and $950,000 excluding salvage value,
       if any. If AULP East must be repaired before AULP West is placed into
       service, we expect to lease additional temporary transmission capacity
       the cost of which is not expected to have a material effect on our
       results of operations.

       Internal Revenue Service Examination
       GCI, Inc., as a wholly owned subsidiary and member of the GCI controlled
       group of corporations, files its income tax returns as part of the
       consolidated group of corporations under GCI. Accordingly, the following
       discussion reflects the consolidated group's activity. Our United States
       income tax return for 2000 was selected for examination by the Internal
       Revenue Service during 2003. The examination began during the fourth
       quarter of 2003. We believe this examination will not have a material
       adverse effect on our financial position, results of operations or our
       liquidity.

       Anchorage Unbundled Network Elements Arbitration
       We are currently involved in arbitration to revise the rates, terms, and
       conditions that govern our access to unbundled network elements in
       Anchorage, and a RCA decision is pending. The RCA's decisions in these
       proceedings could result in a change in our costs of serving new and
       existing markets via the facilities of the ILEC or via wholesale
       offerings.

                                       21                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

(8)    Subsequent Events

       MCI's Emergence from Bankruptcy Protection
       MCI emerged from bankruptcy protection on April 20, 2004. Uncertainties
       exist with respect to the potential realization and the timing of our
       utilization of the MCI credit. We have accounted for our use of the MCI
       credit as a gain contingency, and, accordingly, will recognize a
       reduction of bad debt expense as services are provided by MCI and the
       credit is realized.

        Rural Exemption
        Alaska Communications Systems Group, Inc. ("ACS"), through subsidiary
        companies, provides local services in Fairbanks and Juneau, Alaska.
        These ACS subsidiaries are classified as Rural Telephone Companies under
        the 1996 Telecom Act, which entitles them to an exemption of certain
        material interconnection terms of the 1996 Telecom Act, until and unless
        such "rural exemption" is examined and discontinued by the RCA. An April
        2004 proceeding to decide the matter of rural exemption was canceled
        upon GCI's and ACS' joint settlement. The settlement agreement includes
        the following terms, among others:

           o    ACS relinquishes all claims to exemptions from full local
                telephone competition in Fairbanks and Juneau,
           o    New rates for unbundled loops in Fairbanks and Juneau will begin
                January 1, 2005. We estimate the agreed upon rates will increase
                our local services segment cost of sales and service
                approximately $600,000 to $700,000 during the year ended
                December 31, 2005,
           o    Extension of existing interconnection agreements between ACS and
                GCI for Fairbanks and Juneau until January 1, 2008, and
           o    Resolution of unbundled network element leasing issues for the
                Fairbanks and Juneau markets.

                                       22
<PAGE>
PART I.
ITEM 2.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

In the following discussion, GCI, Inc. and its direct and indirect subsidiaries
are referred to as "we," "us" and "our."

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, we evaluate our
estimates and judgments, including those related to unbilled revenues, cost of
sales and services accruals, allowance for doubtful accounts, depreciation,
amortization and accretion periods, intangible assets, income taxes, and
contingencies and litigation. We base our estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions. See also our "Cautionary Statement
Regarding Forward-Looking Statements."

General Overview

Through our focus on long-term results, acquisitions, and strategic capital
investments, we strive to consistently grow our revenues and expand our margins.
We have historically met our cash needs for operations, regular capital
expenditures and maintenance capital expenditures through our cash flows from
operating activities. Historically, cash requirements for significant
acquisitions and major capital expenditures have been provided largely through
our financing activities. We are funding the construction of a new fiber optic
cable system through our operating cash flows and, to the extent necessary, with
draws on our new Senior Credit Facility, as further discussed in Liquidity and
Capital Resources in this report.

                                       23
<PAGE>
Results of Operations

The following table sets forth selected Statement of Operations data as a
percentage of total revenues for the periods indicated (underlying data rounded
to the nearest thousands):
<TABLE>
<CAPTION>
                                                                                 Percentage
                                                                                 Change (1)
                                                    Three Months Ended              2004
                                                         March 31,                   vs.
(Unaudited)                                         2004          2003              2003
                                                    ----          ----              ----
<S>                                                <C>           <C>              <C>
Statement of Operations Data:
  Revenues:
    Long-distance services                          47.7%         52.2%              7.0%
    Cable services                                  22.8%         25.3%              6.0%
    Local access services                           10.8%          9.1%             39.9%
    Internet services                                5.9%          4.9%             39.6%
    All other services                              12.8%          8.5%             78.3%
                                                -----------------------------------------------
      Total revenues                               100.0%        100.0%             17.4%
  Cost of sales and services                        35.6%         32.6%             28.1%
  Selling, general and administrative expenses      32.5%         35.6%              7.3%
  Bad debt expense (recovery)                       (0.4%)         0.6%           (166.5%)
  Depreciation, amortization and accretion
    expense                                         14.5%         14.6%             16.7%
                                                -----------------------------------------------
      Operating income                              17.8%         16.6%             25.7%
      Net income before income taxes and
        cumulative effect of a change in
        accounting principle in 2003                 3.0%          5.8%            (39.9%)
      Net income before cumulative effect of a
        change in accounting principle in 2003       1.8%          3.3%            (37.8%)
      Net income                                     1.8%          2.7%            (24.5%)
</TABLE>
                                       24
<PAGE>
<TABLE>
<CAPTION>
                                                                                 Percentage
                                                                                 Change (1)
                                                    Three Months Ended              2004
                                                         March 31,                   vs.
(Unaudited)                                         2004          2003              2003
                                                    ----          ----              ----
<S>                                                 <C>          <C>               <C>
Other Operating Data:
Long-distance services operating income (2)         41.3%         46.6%             (5.3%)
Cable services operating income (3)                 25.5%         24.8%              9.1%
Local access services operating income (4)          (3.2%)       (20.5%)            78.0%
Internet services operating income (loss) (5)       14.3%        (18.8%)           205.8%
<FN>
--------------------------
1 Percentage change in underlying data.
2 Computed as a percentage of total external long-distance services revenues.
3 Computed as a percentage of total external cable services revenues.
4 Computed as a percentage of total external local access services revenues.
5 Computed as a percentage of total external Internet services revenues.
--------------------------
</FN>
</TABLE>
Three Months Ended March 31, 2004 ("2004") Compared To Three Months Ended
March 31, 2003 ("2003")

Overview of Revenues and Cost of Sales and Services
Total revenues increased 17.4% from $92.8 million in 2003 to $108.9 million in
2004. All of our segments and All Other Services contributed to the increase in
total revenues. See the discussion below for more information by segment.

Total cost of sales and services increased 28.1% from $30.2 million in 2003 to
$38.7 million in 2004. As a percentage of total revenues, total cost of sales
and services increased from 32.6% in 2003 to 35.6% in 2003. All of our segments
and All Other Services contributed to the increase in total cost of sales and
services. See the discussion below for more information by segment.

Long-Distance Services Overview
Long-distance services revenue in 2004 represented 47.7% of consolidated
revenues. Our provision of interstate and intrastate long-distance services,
Private Line and leased dedicated capacity services, and broadband services
accounted for 94.0% of our total long-distance services revenues during 2004.

Factors that have the greatest impact on year-to-year changes in long-distance
services revenues include the rate per minute charged to customers, usage
volumes expressed as minutes of use, and the number of Private Line, leased
dedicated service and broadband products in use.

Due in large part to the favorable synergistic effects of our bundling strategy,
the long-distance services segment continues to be a significant contributor to
our overall performance, although the migration of traffic from voice to data
and from fixed to mobile wireless continues.

                                       25
<PAGE>
Our long-distance services segment faces significant competition from AT&T
Alascom, long-distance resellers, and local telephone companies that have
entered the long-distance market. We believe our approach to developing,
pricing, and providing long-distance services and bundling different business
segment services will continue to allow us to be competitive in providing those
services.

Our contract to provide interstate and intrastate long-distance services to
Sprint was replaced in March 2002 extending its term to March 2007 with two
one-year automatic extensions to March 2009. Contractual rate reductions occur
annually through the end of the initial term of the contract.

On July 21, 2002 MCI and substantially all of its active United States
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court. On July
22, 2003, the United States Bankruptcy Court approved a settlement agreement for
pre-petition amounts owed to us by MCI and affirmed all of our existing
contracts with MCI. The remaining pre-petition accounts receivable balance owed
by MCI to us after this settlement was $11.1 million ("MCI credit") which we
have used and will continue to use as a credit against amounts payable for
services purchased from MCI.

After settlement, we began reducing the MCI credit as we utilized it for
services otherwise payable to MCI. The use of the credit is recorded as a
reduction of bad debt expense. During the three months ended March 31, 2004 and
2003 we realized approximately $1.2 million and $0, respectively, of the MCI
credit against amounts payable for services received from MCI.

The remaining unused MCI credit totaled $6.7 million and $7.9 million at March
31, 2004 and December 31, 2003, respectively. The credit balance is not recorded
on the Consolidated Balance Sheet as we are recognizing recovery of bad debt
expense as the credit is realized.

MCI emerged from bankruptcy protection on April 20, 2004. We have accounted for
our use of the MCI credit as a gain contingency, and, accordingly, will
recognize a reduction of bad debt expense as services are provided by MCI and
the credit is realized.

Other common carrier traffic routed to us for termination in Alaska is largely
dependent on traffic routed to MCI and Sprint by their customers. Pricing
pressures, general economic deterioration, new program offerings, business
failures, and market and business consolidations continue to evolve in the
markets served by MCI and Sprint. If, as a result, their traffic is reduced, or
if their competitors' costs to terminate or originate traffic in Alaska are
reduced, our traffic will also likely be reduced, and our pricing may be reduced
to respond to competitive pressures. Additionally, a protracted economic malaise
in the 48 contiguous states south of or below Alaska ("Lower 48 States") or a
further disruption in the economy resulting from terrorist attacks and other
attacks or acts of war could affect our carrier customers. We are unable to
predict the effect on us of such changes, however given the materiality of other
common carrier revenues to us, a significant reduction in traffic or pricing
could have a material adverse effect on our financial position, results of
operations and liquidity.

                                       26
<PAGE>
Long-distance Services Segment Revenues
Total long-distance services segment revenues increased 7.0% to $51.9 million in
2004. The components of long-distance services segment revenues are as follows
(amounts in thousands):
<TABLE>
<CAPTION>
                                                                        2004              2003        Percentage Change
                                                                   --------------    -------------    -----------------
   <S>                                                            <C>                    <C>               <C>
   Common carrier message telephone services                      $    21,171            21,062             0.5%
   Residential, commercial and governmental message telephone
     services                                                           9,893            10,211            (3.1%)
   Private line and private network services                           10,366             8,838            17.3%
   Broadband services                                                   7,369             5,747            28.2%
   Lease of fiber optic cable system capacity                           3,097             2,628            17.8%
                                                                   --------------    -------------    ----------------
   Total long-distance services segment revenue                   $    51,896            48,486             7.0%
                                                                   ==============    =============    ================
</TABLE>
Common Carrier Message Telephone Services Revenue
The 2004 increase in message telephone service revenues from other common
carriers (principally MCI and Sprint) resulted from a 20.5% increase in
wholesale minutes carried to 225.5 million minutes. The increase in message
telephone service revenues from other common carriers in 2004 was partially
off-set by the following:

     o   A 11.4% decrease in the average rate per minute on minutes carried for
         other common carriers primarily due to the decreased average rate per
         minute as agreed to in the July 2003 extension of our contract to
         provide interstate and intrastate long-distance services to MCI, and
     o   A discount given to a certain other common carrier customer starting in
         the third quarter of 2003.

Residential, Commercial and Governmental Message Telephone Services Revenue
Selected key performance indicators for our offering of message telephone
service to residential, commercial and governmental customers follow:
<TABLE>
<CAPTION>
                                                      2004                  2003           Percentage Change
                                               ------------------    ------------------    -----------------
   <S>                                           <C>                   <C>                      <C>
   Retail minutes carried                        76.2 million          71.9 million              6.0%
   Average rate per minute                          $0.130                $0.139                (6.5%)
   Number of active residential,
    commercial and governmental
    customers (1)                                   86,100                87,300                (1.4%)
<FN>
   ------------------------------------
   1  All current subscribers who have had calling activity during March 2004 and 2003, respectively.
</FN>
</TABLE>
The decrease in message telephone service revenues from residential, commercial,
and governmental customers in 2004 is primarily due to the following:

     o   A decrease in the average rate per minute primarily due to our
         promotion of and customers' enrollment in calling plans offering a
         certain number of minutes for a flat monthly fee, and

                                       27
<PAGE>
     o   A decrease in the number of active residential, commercial, and
         governmental customers billed primarily due to the effect of customers
         substituting cellular phone, prepaid calling card, and email usage for
         direct dial minutes.

The decrease in message telephone service to residential, commercial and
governmental customers in 2004 is partially off-set by an increase in minutes
carried for these customers. The increase in minutes is primarily a result of
our contract to provide services to the State of Alaska starting in the first
quarter of 2004.

Broadband Services Revenue
The increase in revenues from our packaged telecommunications offering to rural
hospitals and health clinics and our SchoolAccess(TM) offering to rural school
districts in 2004 is primarily due to the following:

     o   An increased number of circuits leased to rural hospitals and health
         clinics in Alaska to both existing and new customers resulting in
         increased revenue of $607,000, and
     o   A $617,000 increase in special project revenue for services sold to the
         federal government.

Long-distance Services Segment Cost of Sales and Services
Long-distance services segment cost of sales and services increased 18.6% to
$14.3 million in 2004. Long-distance services segment cost of sales and services
as a percentage of long-distance services segment revenues increased from 24.9%
in 2003 to 27.6% in 2004 primarily due to the following:

     o   A $2.3 million refund ($1.9 million after deducting certain direct
         costs) in 2003 from a local exchange carrier in respect of its earnings
         that exceeded regulatory requirements and did not recur in 2004,
     o   The decreased average rate per minute on minutes carried for other
         common carriers as agreed to in the July 24, 2003 extension of our
         contract to provide interstate and intrastate long-distance services to
         MCI, and
     o   A discount given to a certain other common carrier customer in 2004
         without a corresponding decrease in the cost of sales and services.

The increase in the long-distance services segment cost of sales and services as
a percentage of long-distance services segment revenues is partially off-set by
the following:

     o   A $400,000 refund in 2004 from an intrastate access cost pool that
         previously overcharged us for access services, and
     o   Reductions in access costs due to distribution and termination of our
         traffic on our own local access services network instead of paying
         other carriers to distribute and terminate our traffic. The statewide
         average cost savings is approximately $.011 and $.061 per minute for
         interstate and intrastate traffic, respectively. We expect cost savings
         to continue to occur as long-distance traffic originated, carried, and
         terminated on our own facilities grows.

Cable Services Overview
Cable television revenues in 2004 represented 22.8% of consolidated revenues.
Our cable systems serve 35 communities and areas in Alaska, including the
state's four largest population centers, Anchorage, Fairbanks, the
Matanuska-Susitna Valley and Juneau.

                                       28
<PAGE>
We generate cable services revenues from four primary sources: (1) digital and
analog programming services, including monthly basic and premium subscriptions,
pay-per-view movies and other one-time events, such as sporting events; (2)
equipment rentals and installation; (3) cable modem services (shared with our
Internet services segment); and (4) advertising sales. During 2004 programming
services generated 73.5% of total cable services revenues, cable services'
allocable share of cable modem services accounted for 13.3% of such revenues,
equipment rental and installation fees accounted for 9.4% of such revenues,
advertising sales accounted for 3.0% of such revenues, and other services
accounted for the remaining 0.8% of total cable services revenues.

Effective February 2003, we increased rates charged for certain cable services
and premium packages in six communities, including three of the state's four
largest population centers, Anchorage, Fairbanks and Juneau. Rates increased
approximately 4% for those customers who experienced an adjustment.

The primary factors that contribute to year-to-year changes in cable services
revenues include average monthly subscription and pay-per-view rates, the mix
among basic, premium and pay-per-view services and digital and analog services,
the average number of cable television and cable modem subscribers during a
given reporting period, and revenues generated from new product offerings.

In 2002 we signed seven-year retransmission agreements with the five local
Anchorage broadcasters and began up-linking and distributing the local Anchorage
programming to all of our cable systems. This local programming provides
additional value to our cable subscribers that not all our Direct Broadcast
Satellite ("DBS") competitors can provide. In the third quarter of 2003 DBS
service provider Dish Network (EchoStar Communications Corporation) began
providing, for an additional fee, Anchorage based broadcaster programming in
Anchorage and in other Alaska communities where there is not a similar local
broadcast affiliate.

Cable Services Segment Revenues and Cost of Sales and Services
Selected key performance indicators for our cable services segment follow:
<TABLE>
<CAPTION>
                                                                                        Percentage
                                                         2004             2003            Change
                                                    -------------    -------------    ---------------
   <S>                                                 <C>              <C>               <C>
   Basic subscribers                                   134,000          136,300           (1.7%)
   Digital special interest subscribers                 34,000           30,200           12.6%
   Cable modem subscribers                              51,700           38,600           33.9%
   Homes passed                                        203,400          198,400            2.5%
</TABLE>
Total cable services segment revenues increased 6.0% to $24.9 million and
average gross revenue per average basic subscriber per month increased $2.87 or
4.8% in 2004.

The increase in cable services segment revenues is primarily due to a 32.8%
increase in its share of cable modem revenue (offered through our Internet
services segment) to $3.3 million in 2004 due to an increased number of cable
modems deployed. Approximately 99% of our cable homes passed are able to
subscribe to our cable modem service. In the second quarter of 2003 we completed
our upgrade of the Ketchikan cable system. Customers in this system are now able
to subscribe to cable modem service.

We now offer digital programming service in Anchorage, the Matanuska-Susitna
Valley, Fairbanks, Juneau, Ketchikan, Kenai, and Soldotna, representing
approximately 88% of our total homes passed at

                                       29
<PAGE>
March 31, 2004. We launched digital programming services in the
Matanuska-Susitna Valley cable system during the first and second quarters of
2003 and launched such services in the Ketchikan cable system in the third
quarter of 2003.

Cable services cost of sales and services increased 9.4% to $7.1 million in 2004
due to programming cost increases for most of our cable programming services
offerings. Cable services cost of sales and services as a percentage of cable
services revenues increased from 27.6% in 2003 to 28.4% in 2004 primarily due to
rate increases in 2004 by programming vendors exceeding our rate adjustments.
Cost of sales increases are partially off-set by increasing amounts of cable
modem services sold that generally have higher margins than do cable programming
services.

Multiple System Operator ("MSO") Operating Statistics
Our operating statistics include capital expenditures and customer information
from our cable services segment and the components of our local access services
and Internet services segments which offer services utilizing our cable
services' facilities.

Our capital expenditures by standard reporting category for the three month
periods ending March 31, 2004 and 2003 follows (amounts in thousands):

                                                    2004           2003
                                               ------------    -----------
    Customer premise equipment                $    3,438          1,276
    Commercial                                        47             68
    Scalable infrastructure                        1,755            135
    Line extensions                                   44             88
    Upgrade/rebuild                                1,770             72
    Support capital                                  181             77
                                                ------------    -----------
    Sub-total                                      7,235          1,716

    Remaining reportable segments and
      All Other capital expenditures              17,966          4,758
                                                ------------    -----------
                                               $  25,201          6,474
                                                ============    ===========

The standardized definition of a customer relationship is the number of
customers that receive at least one level of service, encompassing voice, video,
and data services, without regard to which services customers purchase. At March
31, 2004 and 2003 we had 122,100 and 124,000 customer relationships,
respectively.

The standardized definition of a revenue generating unit is the sum of all
primary analog video, digital video, high-speed data, and telephony customers,
not counting additional outlets. At March 31, 2004 and 2003 we had 185,800 and
173,300 revenue generating units, respectively.

Local Access Services Overview
We generate local access services revenues from three primary sources: (1)
business and residential basic dial tone services; (2) business Private Line and
special access services; and (3) business and residential features and other
charges, including voice mail, caller ID, distinctive ring, inside wiring and
subscriber line charges. During 2004 local access services revenues represented
10.8% of consolidated revenues.

                                       30
<PAGE>
The primary factors that contribute to year-to-year changes in local access
services revenues include the average number of business and residential
subscribers to our services during a given reporting period, the average monthly
rates charged for non-traffic sensitive services, the number and type of
additional premium features selected, and the traffic sensitive access rates
charged to carriers and the Universal Service Program.

Our local access services segment faces significant competition in Anchorage,
Fairbanks, and Juneau from ACS , which is the largest ILEC in Alaska, and from
AT&T Alascom, Inc. We believe our approach to developing, pricing, and providing
local access services and bundling different business segment services will
allow us to be competitive in providing those services.

At March 31, 2004, 108,600 lines were in service as compared to approximately
98,900 lines in service at March 31, 2003. At March 31, 2004 approximately 1,200
additional lines were awaiting connection. We estimate that our 2004 lines in
service represents a statewide market share of approximately 23%.

Our access line mix at March 31, 2004 follows:

     o   Residential lines represent approximately 59% of our lines,
     o   Business customers represent approximately 35% of our lines, and
     o   Internet access customers represent approximately 6% of our lines.

Approximately 85% of our lines are provided on our own facilities and leased
local loops. Approximately 5% of our lines are provided using UNE platform.

In December 2003 we distributed our new phone directory and began recognizing
revenue and costs of sales and service in the local access services segment. We
recognized one month of revenue and cost of sales and service in the fourth
quarter of 2003 and are recognizing the remaining eleven months in 2004.

In April 2004 we successfully launched our DLPS deployment utilizing our
Anchorage coaxial cable facilities. This service delivery method allows us to
utilize our own cable facilities to provide local access to our customers and
avoid paying local loop charges to the ILEC. To ensure the necessary equipment
is available to us we have committed to purchase a certain number of outdoor,
network powered multi-media adapters.

Local Access Services Segment Revenues and Cost of Sales and Services
Local access services segment revenues increased 39.9% in 2004 to $11.8 million
primarily due to the following:

     o   Growth in the average number of lines in service, and
     o   $1.3 million increase in support from the Universal Service Program.

                                       31
<PAGE>
Local access services segment cost of sales and services increased 15.9% to $6.5
million in 2004. Local access services segment cost of sales and services as a
percentage of local access services segment revenues decreased from 67.0% in
2003 to 55.5% in 2004, primarily due to the following:

     o   $1.3 million increase in support from the Universal Service Program
         with no corresponding increase in cost of sales and services, and
     o   $218,000 increase in the end user common line rate in the third quarter
         of 2003.

The local access services segment operating results are negatively affected by
the allocation of the benefit of access cost savings to the long-distance
services segment. If the local access services segment received credit for the
access charge reductions recorded by the long distance services segment, the
local access services segment operating results would have improved by
approximately $1.7 million and the long distance services segment operating
results would have been reduced by an equal amount in 2004. Avoided access
charges totaled approximately $1.8 million in 2003.

The local access services segment operating results were affected by our
evaluation and testing of DLPS technology. We successfully launched our DLPS
deployment in April 2004.

Internet Services Overview
We generate Internet services revenues from three primary sources: (1) access
product services, including commercial, Internet service provider, and retail
dial-up access; (2) network management services; and (3) Internet services'
allocable share of cable modem revenue (a portion of cable modem revenue is also
recognized by our cable services segment). During 2004 Internet services segment
revenues represented 5.9% of consolidated revenues.

The primary factors that contribute to year-to-year changes in Internet services
revenues include the average number of subscribers to our services during a
given reporting period, the average monthly subscription rates, the amount of
bandwidth purchased by large commercial customers, and the number and type of
additional premium features selected.

Marketing campaigns continue to be deployed targeting residential and commercial
customers featuring bundled products. Our Internet offerings are bundled with
various combinations of our long-distance, cable, and local access services
offerings and provide free or discounted basic or premium Internet services.
Value-added premium Internet features are available for additional charges.

We compete with a number of Internet service providers in our markets. We
believe our approach to developing, pricing, and providing Internet services
allows us to be competitive in providing those services.

Internet Services Segment Revenues and Cost of Sales and Services
Selected key performance indicators for our Internet services segment follow:
<TABLE>
<CAPTION>
                                                                                 Percentage
                                                  2004             2003            Change
                                             ------------     ------------    ---------------
   <S>                                          <C>               <C>               <C>
   Total Internet subscribers                   100,600           91,800             9.6%
   Cable modem subscribers                       51,700           38,600            33.9%
   Dial-up subscribers                           48,900           53,500            (8.6%)
</TABLE>

                                       32
<PAGE>
Total Internet services segment revenues increased 39.6% to $6.4 million in 2004
primarily due to the 34.3% increase in its allocable share of cable modem
revenues to $2.7 million in 2004 as compared to 2003. The increase in cable
modem revenues is primarily due to growth in cable modem subscribers.
Additionally, cable modem revenue growth is affected by the level of service our
subscribers select. In 2004 and 2003, 7.4% and 6.7%, respectively, of our
subscribers selected our highest level of cable modem service resulting in a
29.7% or approximately $1.3 million increase in revenue in 2004 as compared to
2003.

We previously reported a total of 71,600 Internet subscribers at March 31, 2003.
This subscriber count was based upon the total number of active dial-up
subscribers at March 31, 2003. Not all cable modem subscribers paying for a
dial-up plan had activated their dial-up service. When we first started selling
cable modem service it was packaged in a way that almost all cable modem
subscribers were also dial up subscribers. As we introduced new packages and
plans and started promoting our cable modem LiteSpeed service the number of
cable modem subscribers without a dial up plan increased substantially. An
internal review during the second quarter of 2003 revealed that these subscriber
counts had risen substantially enough that they are now being reported
separately.

Internet services cost of sales and services increased 25.3% to $1.8 million in
2004, and as a percentage of Internet services revenues, totaled 27.5% and 30.6%
in 2004 and 2003, respectively. The 2004 decrease as a percentage of Internet
services revenues is primarily due to the increase in Internet's portion of
cable modem revenue which generally has higher margins than do other Internet
services products. As Internet services revenues increase, economies of scale
and more efficient network utilization continue to result in reduced Internet
cost of sales and services as a percentage of revenues.

All Other Services Overview
Revenues reported in the All Other category as described in note 6 in the
accompanying "Notes to Interim Condensed Consolidated Financial Statements"
include our managed services, product sales, and cellular telephone services.

Revenues included in the All Other category represented 12.8% of total revenues
in 2004.

All Other Revenues and Costs of Sales and Services
All Other revenues increased 78.3% to $14.0 million in 2004. The increase in
revenues is primarily due to the following:

     o   $6.1 million in special project revenue earned from our GCI Fiber
         system in 2004, and
     o   Increased monthly revenue earned from our GCI Fiber system that
         transits the Trans Alaska oil pipeline corridor.

The increase described above is partially off-set by a $840,000 decrease in
product sales revenue to $786,000 in 2004. The decrease is due to sales of
product to two customers in 2003 that were not repeated in 2004.

All Other costs of sales and services increased 94.3% to $9.1 million in 2004,
and as a percentage of All Other revenues, totaled 64.8% and 59.5% in 2004 and
2003, respectively. The increase in All Other costs of sales and services as a
percentage of All Other revenues is primarily due to the recognition of $5.5
million in costs associated with special project revenue earned from our GCI
Fiber system in 2004.

                                       33
<PAGE>
The cost of sales and services as a percentage of revenue was 89.7% for this
project, which is a higher percentage than we realize for the regular monthly
revenue in All Other revenues.

The increase in the cost of sales and services as a percentage of revenue is
partially off-set by increased monthly revenue earned from our recurring service
contracts in 2004 which exceeds the corresponding increase in costs of sales or
services.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 7.3% to $35.4 million in
2004 primarily due to a $1.5 million increase in labor and health insurance
costs. As a percentage of total revenues, selling, general and administrative
expenses decreased to 32.5% in 2004 from 35.6% in 2003, primarily due to an
increase in revenues without a corresponding increase in selling, general and
administrative expenses.

Marketing and advertising expenses as a percentage of total revenues increased
from 2.7% in 2003 to 2.8% in 2004.

Bad Debt Expense (Recovery)
Bad debt expense (recovery) decreased 166.5% to ($397,000) in 2004. The 2004
decrease is primarily due to realization of approximately $1.2 million of the
MCI credit through a reduction to bad debt expense in 2004, as further discussed
in the "Long Distance Service Overview" above.

Depreciation, Amortization and Accretion Expense
Depreciation, amortization and accretion expense increased 16.7% to $15.8
million in 2004. The increase is primarily attributed to our $45.8 million
investment in equipment and facilities placed into service during 2003 for which
a full year of depreciation will be recorded in 2004, and the $7.0 million
investment in equipment and facilities placed into service during 2004 for which
a partial year of depreciation will be recorded in 2004.

Other Expense, Net
Other expense, net of other income, increased 60.7% to $16.2 million in 2004.
The increase is primarily due to the following:

     o   In 2004 we paid redemption premiums totaling $6.1 million to redeem our
         old Senior Notes, and
     o   As a result of redeeming our old Senior Notes in 2004 we recognized
         $2.3 million in unamortized old Senior Notes fee expense.

Partially offsetting the increases described above was a $2.3 million decrease
in interest expense in 2004 on our new Senior Credit Facility due to a decrease
in the average outstanding balance owed and a decreased interest rate as
compared to 2003.

Income Tax Expense
GCI, Inc., as a wholly owned subsidiary and member of the GCI controlled group
of corporations, files its income tax returns as part of the consolidated group
of corporations under GCI. Accordingly, the following discussion reflects the
consolidated group's activity and balances.

                                       34
<PAGE>
Income tax expense was $1.3 million in 2004 and $2.3 million in 2003. The change
was due to decreased net income before income taxes and cumulative effect of a
change in accounting principle in 2004 as compared to 2003. Our effective income
tax rate decreased from 42.4% in 2003 to 40.5% in 2004 due to the decreasing
proportion of items that are nondeductible for income tax purposes in 2004.

At March 31, 2004, we have (1) tax net operating loss carryforwards of
approximately $188.6 million that will begin expiring in 2005 if not utilized,
and (2) alternative minimum tax credit carryforwards of approximately $1.9
million available to offset regular income taxes payable in future years. Our
utilization of certain net operating loss carryforwards is subject to
limitations pursuant to Internal Revenue Code section 382.

Tax benefits associated with recorded deferred tax assets are considered to be
more likely than not realizable through future reversals of existing taxable
temporary differences and future taxable income exclusive of reversing temporary
differences and carryforwards. The amount of deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced which would result in
additional income tax expense. We estimate that our effective annual income tax
rate for financial statement purposes will be 38% to 41% in 2004.

Cumulative Effect of a Change in Accounting Principle
On January 1, 2003 we adopted SFAS No. 143, "Accounting for Asset Retirement
Obligations," and recorded the cumulative effect of accretion and depreciation
expense as a cumulative effect of a change in accounting principle of
approximately $544,000, net of income tax benefit of $367,000.

Liquidity and Capital Resources

Cash flows from operating activities totaled $14.8 million in 2004 as compared
to $14.3 million in 2003. The 2004 increase is primarily due to increased cash
flow from all of our reportable segments and All Other Services partially
off-set by a $4.3 million payment of our company-wide success sharing bonus in
2004 and a $2.3 million refund in 2003 from a local exchange carrier in respect
of its earnings that exceeded regulatory requirements..

Other sources of cash during 2004 include $245.7 million from the issuance of
our new Senior Notes and a $10.0 million draw under the revolving credit portion
of our new Senior Credit Facility. Uses of cash during 2004 included
expenditures of $25.2 million for property and equipment, including construction
in progress, the $180.0 million repayment of our old Senior Notes, the $53.8
million repayment of the term and revolving credit portions of our new Senior
Credit Facility, payment of $6.4 million in fees associated with the new Senior
Notes and new Senior Credit Facility, and payment of redemption premiums
totaling $6.1 million to redeem our old Senior Notes.

Net receivables decreased $6.2 million from December 31, 2003 to March 31, 2004
primarily due to the February 2004 receipt of $5.6 million on a trade receivable
for broadband services provided to hospitals and health clinics.

Working capital totaled $13.4 million at March 31, 2004, a $11.3 million
increase as compared to $2.1 million at December 31, 2003. The increase is
primarily due to the January 2004 draw on our new Senior Credit Facility which
we used to fund our old Senior Notes interest payment in February 2004.

                                       35
<PAGE>
In February 2004 GCI, Inc. sold $250 million in aggregate principal amount of
senior debt securities due in 2014. The new Senior Notes are an unsecured senior
obligation. We pay interest of 7.25% on the new Senior Notes. The new Senior
Notes were sold at a discount of $4.3 million. The Senior Notes are carried on
our Consolidated Balance Sheet net of the unamortized portion of the discount,
which is being amortized to Interest Expense over the life of the new Senior
Notes.

The net proceeds of the offering were primarily used to repay our existing
$180.0 million 9.75% Senior Notes and to repay approximately $43.8 million of
the term portion and $10.0 million of the revolving portion of our new Senior
Credit Facility. Semi-annual interest payments of approximately $9.1 million
will be due beginning August 15, 2004. In connection with the issuance, we paid
fees and other expenses of approximately $6.3 million which are being amortized
over the life of the new Senior Notes.

The new Senior Notes were offered only to qualified institutional buyers
pursuant to exemptions from registration under the Securities Act. The new
Senior Notes have not been registered under the Securities Act and, unless so
registered, may not be offered or sold except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities
Act and applicable state securities laws. We plan to register our new Senior
Notes during the second quarter of 2004.

The new Senior Notes are not redeemable prior to February 15, 2009. At any time
on or after February 15, 2009, the new Senior Notes are redeemable at our
option, in whole or in part, on not less than thirty days nor more than sixty
days notice, at the following redemption prices, plus accrued and unpaid
interest (if any) to the date of redemption:

          If redeemed during the twelve month period
          commencing February 1 of the year indicated:         Redemption Price
          ---------------------------------------------------- -----------------
          2009                                                     103.625%
          2010                                                     102.417%
          2011                                                     101.208%
          2012 and thereafter                                      100.000%

We may, on or prior to February 17, 2007, at our option, use the net cash
proceeds of one or more underwritten public offerings of our qualified stock to
redeem up to a maximum of 35% of the initially outstanding aggregate principal
amount of our new Senior Notes at a redemption price equal to 107.25% of the
principal amount of the new Senior Notes, together with accrued and unpaid
interest, if any, thereon to the date of redemption, provided that not less than
65% of the principal amount of the new Senior Notes originally issued remain
outstanding following such a redemption.

The new Senior Notes restrict GCI, Inc. and certain of its subsidiaries from
incurring debt in most circumstances unless the result of incurring debt does
not cause our leverage ratio to exceed 6.0 to one. The new Senior Notes do not
allow debt under the new Senior Credit Facility to exceed the greater of (and
reduced by certain stated items):

     o   $250 million, reduced by the amount of any prepayments, or
     o   3.0 times earnings before interest, taxes, depreciation and
         amortization for the last four full fiscal quarters of GCI, Inc. and
         certain of its subsidiaries.

                                       36
<PAGE>
The new Senior Notes limit our ability to make cash dividend payments.

We conducted a Consent Solicitation and Tender Offer for the old Senior Notes.
Through February 13, 2004 we accepted for payment $114.6 million principal
amount of notes which were validly tendered. Such notes accepted for payment
received additional consideration as follows:

     o   $4.0 million based upon a payment of $1,035 per $1,000 principal
         amount, consisting of the purchase price of $1,025 per $1,000 principal
         amount and the consent payment of $10 per $1,000 principal amount, and
     o   $497,000 in accrued and unpaid interest through February 16, 2004.

The remaining principal amount of $65.4 million was redeemed on March 18, 2004
for additional consideration as follows:

     o   $2.1 million based upon a payment of $1,032.50 per $1,000 principal
         amount, and
     o   $833,000 in accrued and unpaid interest through March 18, 2004.

The total redemption cost was $186.1 million. The premium to redeem our old
Senior Notes was $6.1 million (excluding interest cost of $1.3 million) and was
recognized as a component of Other Income (Expense) during the three months
ended March 31, 2004.

Compliance with the redemption notice requirements in the Indenture resulted in
a delay before final payment of some of the old Senior Notes. As a result of
such delay, our total debt increased during the overlap period between the
redemption of the old Senior Notes and the issuance of the new Senior Notes
making us out of compliance with Section 6.11 of our Credit, Guaranty, Security
and Pledge Agreement, dated as of October 30, 2003. We received a waiver from
compliance with Section 6.11 until April 30, 2004. After the final redemption
payment on March 18, 2004 we were in compliance with Section 6.11.

In January 2004 we drew $10.0 million under the revolving portion of our new
Senior Credit facility. Our ability to draw down on the revolver portion of our
new Senior Credit Facility could be diminished if we are not in compliance with
all new Senior Credit Facility covenants or have a material adverse change at
the date of the request for the draw. In February 2004 we used a portion of the
proceeds from the issuance of our new Senior Notes to repay approximately $43.8
million of the term portion and $10.0 million of the revolving portion of our
new Senior Credit Facility.

We were in compliance with all loan covenants at March 31, 2004.

Our expenditures for property and equipment, including construction in progress,
totaled $25.2 million and $6.5 million during 2004 and 2003, respectively. Our
capital expenditures requirements in excess of approximately $25 million per
year, excluding the new fiber optic cable system construction costs, are largely
success driven and are a result of the progress we are making in the
marketplace. We expect our 2004 expenditures for property and equipment for our
core operations, including construction in progress and excluding the new fiber
optic cable system construction costs and other special projects described
below, to total $45 million to $55 million, depending on available opportunities
and the amount of cash flow we generate during 2004.

                                       37
<PAGE>
We are constructing a fiber optic cable system connecting Seward, Alaska and
Warrenton, Oregon, with leased backhaul facilities to connect it to our
switching and distribution centers in Anchorage, Alaska and Seattle, Washington.
The 1,544-statute mile cable system has a total design capacity of 960 Gigabits
per second access speed and is planned to be operational in May 2004. The cable
will complement our existing fiber optic cable system between Whittier, Alaska
and Seattle, Washington. The two cables will provide physically diverse backup
to each other in the event of an outage. We expect to fund construction costs
that are expected to total approximately $50 million through our operating cash
flows and, to the extent necessary, with draws on our new Senior Credit
Facility. During 2004 our capital expenditures for this project have totaled
approximately $10.3 million and from inception have totaled $28.4 million, most
of which have been funded through our operating cash flows.

Planned capital expenditures over the next five years include those necessary
for continued expansion of our long-distance, local exchange and Internet
facilities, supplementing our existing network backup facilities, continuing
development of our PCS network to meet the requirements of our license,
continuing deployment of DLPS, upgrades to our cable television plant, and
potential development of a wireless network.

In April 2004 we successfully launched our DLPS service delivery method. To
ensure the necessary equipment is available to us we have entered into an
agreement to purchase a certain number of outdoor, network powered multi-media
adapters. The agreement has a remaining outstanding commitment at March 31, 2004
of $17.4 million.

A migration of MCI's or Sprint's traffic off our network without it being
replaced by other common carriers that interconnect with our network could have
a materially adverse impact on our financial position, results of operations and
liquidity.

The long-distance, local access, cable, Internet and wireless services
industries continue to experience substantial competition, regulatory
uncertainty, and continuing technological changes. Our future results of
operations will be affected by our ability to react to changes in the
competitive and regulatory environment and by our ability to fund and implement
new or enhanced technologies. We are unable to determine how competition,
economic conditions, and regulatory and technological changes will affect our
ability to obtain financing under acceptable terms and conditions.

We believe that we will be able to meet our current and long-term liquidity and
capital requirements and fixed charges through our cash flows from operating
activities, existing cash, cash equivalents, short-term investments, credit
facilities, and other external financing and equity sources. Should cash flows
be insufficient to support additional borrowings and principal payments
scheduled under our existing credit facilities, capital expenditures will likely
be reduced.

Critical Accounting Policies

Our accounting and reporting policies comply with accounting principles
generally accepted in the United States of America. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions. The financial position and results
of operations can be affected by these estimates and assumptions, which are
integral to understanding reported results. Critical accounting policies are
those policies that management believes are the most important to the portrayal
of the Company's financial condition and results, and require management to make
estimates that are difficult, subjective or complex. Most

                                       38
<PAGE>
accounting policies are not considered by management to be critical accounting
policies. Several factors are considered in determining whether or not a policy
is critical in the preparation of financial statements. These factors include,
among other things, whether the estimates are significant to the financial
statements, the nature of the estimates, the ability to readily validate the
estimates with other information including third parties or available prices,
and sensitivity of the estimates to changes in economic conditions and whether
alternative accounting methods may be utilized under accounting principles
generally accepted in the United States of America. For all of these policies,
management cautions that future events rarely develop exactly as forecast, and
the best estimates routinely require adjustment. Management has discussed the
development and the selection of critical accounting policies with the Company's
Audit Committee.

Those policies considered to be critical accounting policies for the three
months ended March 31, 2004 are described below.

     o   We maintain allowances for doubtful accounts for estimated losses
         resulting from the inability of our customers to make required
         payments. We base our estimates on the aging of our accounts receivable
         balances, financial health of specific customers, and our historical
         write-off experience, net of recoveries. If the financial condition of
         our customers were to deteriorate or if they are unable to emerge from
         reorganization proceedings, resulting in an impairment of their ability
         to make payments, additional allowances may be required. If their
         financial condition improves or they emerge successfully from
         reorganization proceedings, allowances may be reduced. Such allowance
         changes could have a material effect on our consolidated financial
         condition and results of operations.

     o   We record all assets and liabilities acquired in purchase acquisitions,
         including goodwill and other intangibles, at fair value as required by
         SFAS No. 141, "Business Combinations." Goodwill and indefinite-lived
         assets such as our cable segment franchise agreements are no longer
         amortized but are subject, at a minimum, to annual tests for
         impairment. Other intangible assets are amortized over their estimated
         useful lives using the straight-line method, and are subject to
         impairment if events or circumstances indicate a possible inability to
         realize the carrying amount. The initial goodwill and other intangibles
         recorded and subsequent impairment analysis requires management to make
         subjective judgments concerning estimates of the applicability of
         quoted market prices in active markets and, if quoted market prices are
         not available and/or are not applicable, how the acquired asset will
         perform in the future using a discounted cash flow analysis. Estimated
         cash flows may extend beyond ten years and, by their nature, are
         difficult to determine over an extended timeframe. Events and factors
         that may significantly affect the estimates include, among others,
         competitive forces, customer behaviors and attrition, changes in
         revenue growth trends, cost structures and technology, and changes in
         discount rates, performance compared to peers, material and ongoing
         negative economic trends, and specific industry or market sector
         conditions. In determining the reasonableness of cash flow estimates,
         we review historical performance of the underlying asset or similar
         assets in an effort to improve assumptions utilized in our estimates.
         In assessing the fair value of goodwill and other intangibles, we may
         consider other information to validate the reasonableness of our
         valuations including third-party assessments. These evaluations could
         result in a change in useful lives in future periods and could result
         in write-down of the value of intangible assets. Because of the
         significance of the identified intangible assets and goodwill to our
         consolidated balance sheet, the annual impairment analysis will be
         critical. Any changes in key assumptions about the business and its
         prospects, or changes in market conditions or other

                                       39
<PAGE>
         externalities, could result in an impairment charge and such a charge
         could have a material adverse effect on our consolidated financial
         position, results of operations or liquidity. Refer to note 3 in the
         accompanying "Notes to Interim Condensed Consolidated Financial
         Statements" for additional information regarding intangible assets.

     o   We estimate unbilled long-distance services segment cost of sales and
         services based upon minutes of use carried through our network and
         established rates. We estimate unbilled costs for new circuits and
         services, and when network changes occur that result in traffic routing
         changes or a change in carriers. Carriers that provide service to us
         regularly change their networks which can lead to new, revised or
         corrected billings. Such estimates are revised or removed when
         subsequent billings are received, payments are made, billing matters
         are researched and resolved, tariffed billing periods lapse, or when
         disputed charges are resolved. Revisions to previous estimates could
         either increase or decrease costs in the year in which the estimate is
         revised which could have a material effect on our consolidated
         financial condition and results of operations.

     o   GCI, Inc., as a wholly owned subsidiary and member of the GCI
         controlled group of corporations, files its income tax returns as part
         of the consolidated group of corporations under GCI. Accordingly, the
         following discussion reflects the consolidated group's activity and
         balances. Our income tax policy provides for deferred income taxes to
         show the effect of temporary differences between the recognition of
         revenue and expenses for financial and income tax reporting purposes
         and between the tax basis of assets and liabilities and their reported
         amounts in the financial statements in accordance with SFAS No. 109,
         "Accounting for Income Taxes." We have recorded deferred tax assets of
         approximately $78.6 million associated with income tax net operating
         losses that were generated from 1990 to 2004, and that expire from 2005
         to 2023. Pre-acquisition income tax net operating losses associated
         with acquired companies are subject to additional deductibility limits.
         We have recorded deferred tax assets of approximately $1.9 million
         associated with alternative minimum tax credits that do not expire.
         Significant management judgment is required in developing our provision
         for income taxes, including the determination of deferred tax assets
         and liabilities and any valuation allowances that may be required
         against the deferred tax assets. In conjunction with certain 1996
         acquisitions, we determined that approximately $20 million of the
         acquired net operating losses would not be utilized for income tax
         purposes, and elected with our December 31, 1996 income tax returns to
         forego utilization of such acquired losses. Deferred tax assets were
         not recorded associated with the foregone losses and, accordingly, no
         valuation allowance was provided. We have not recorded a valuation
         allowance on the deferred tax assets as of March 31, 2004 based on
         management's belief that future reversals of existing taxable temporary
         differences and estimated future taxable income exclusive of reversing
         temporary differences and carryforwards, will, more likely than not, be
         sufficient to realize the benefit of these assets over time. In the
         event that actual results differ from these estimates or if our
         historical trends change, we may be required to record a valuation
         allowance on deferred tax assets, which could have a material adverse
         effect on our consolidated financial position, results of operations or
         liquidity.

Other significant accounting policies, not involving the same level of
measurement uncertainties as those discussed above, are nevertheless important
to an understanding of the financial statements. Polices related to revenue
recognition and financial instruments require difficult judgments on complex
matters that are often subject to multiple sources of authoritative guidance.
Certain of these matters,

                                       40
<PAGE>
including but not limited to the requirement to account for the fair value of
stock options as compensation expense, are among topics currently under
reexamination by accounting standards setters and regulators. With the exception
of accounting for the cost of stock options, no specific conclusions reached by
these standard setters appear likely to cause a material change in our
accounting policies, although outcomes cannot be predicted with confidence. A
complete discussion of our significant accounting policies can be found in note
1 in the "Notes to Consolidated Financial Statements" included in our December
31, 2003 Form 10-K. A condensed discussion of our significant accounting
policies can be found in note 1 in the accompanying "Notes to Interim Condensed
Consolidated Financial Statements."

Geographic Concentration and the Alaska Economy

We offer voice and data telecommunication and video services to customers
primarily throughout Alaska. Because of this geographic concentration, growth of
our business and of our operations depends upon economic conditions in Alaska.
The economy of Alaska is dependent upon the natural resource industries, and in
particular oil production, as well as investment earnings, tourism, government,
and United States military spending. Any deterioration in these markets could
have an adverse impact on us. All of the federal funding and the majority of
investment revenues are dedicated for specific purposes, leaving oil revenues as
the primary source of general operating revenues. In fiscal 2003 the State's
actual results indicate that Alaska's oil revenues, federal funding and
investment revenues supplied 36%, 30% and 21%, respectively, of the state's
total revenues. In fiscal 2004 state economists forecast that Alaska's oil
revenues, federal funding and investment revenues will supply 23%, 25% and 44%,
respectively, of the state's total projected revenues.

The volume of oil transported by the TransAlaska Oil Pipeline System over the
past 20 years has been as high as 2.0 million barrels per day in fiscal 1988.
Production has been declining over the last several years with an average of
0.991 million barrels produced per day in fiscal 2003. The state forecasts the
production rate to decline from 0.985 million barrels produced per day in fiscal
2004 to 0.843 million barrels produced per day in fiscal 2015.

Market prices for North Slope oil averaged $28.15 in fiscal 2003 and are
forecasted to average $31.13 in fiscal 2004. The closing price per barrel was
$36.12 on April 19, 2004. To the extent that actual oil prices vary materially
from the state's projected prices the state's projected revenues and deficits
will change. When the price of oil is greater than $23.00 per barrel, every $1
change in the price per barrel of oil is forecasted to result in a $40.0 to
$70.0 million change in the state's fiscal 2004 revenue. The production policy
of the Organization of Petroleum Exporting Countries and its ability to continue
to act in concert represents a key uncertainty in the state's revenue forecast.

The State of Alaska maintains the Constitutional Budget Reserve Fund that is
intended to fund budgetary shortfalls. If the state's current projections are
realized, the Constitutional Budget Reserve Fund will be depleted in 2008. The
date the Constitutional Budget Reserve Fund is depleted is highly influenced by
the price of oil. If the fund is depleted, aggressive state action will be
necessary to increase revenues and reduce spending in order to balance the
budget. The governor of the State of Alaska and the Alaska legislature continue
to pursue cost cutting and revenue enhancing measures.

Should new oil discoveries or developments not materialize or the price of oil
become depressed, the long term trend of continued decline in oil production
from the Prudhoe Bay area is inevitable with a corresponding adverse impact on
the economy of the state, in general, and on demand for

                                       41
<PAGE>
telecommunications and cable television services, and, therefore, on us, in
particular. Periodically there are renewed efforts to allow exploration and
development in the Arctic National Wildlife Refuge ("ANWR"). The United States
Energy Information Agency estimates it could take nine years to begin oil field
drilling after approval of ANWR exploration.

Deployment of a natural gas pipeline from the State of Alaska's North Slope to
the Lower 48 States has been proposed to supplement natural gas supplies. A
competing natural gas pipeline through Canada has also been proposed. The
economic viability of a natural gas pipeline depends upon the price of and
demand for natural gas. Either project could have a positive impact on the State
of Alaska's revenues and the Alaska economy. In January 2004, two competing
groups submitted applications to the State of Alaska to negotiate tax and other
financial terms for the construction of a natural gas pipeline. One of the
groups has since abandoned their plan to build a natural gas pipeline. In April
2004, the State of Alaska and TransCanada Corporation signed a memorandum of
understanding which could lead to the construction of a natural gas pipeline.
The governor of the State of Alaska and certain natural gas transportation
companies continue to support a natural gas pipeline from Alaska's North Slope
by trying to reduce the project's costs and by advocating for federal tax
incentives to further reduce the project's costs.

Development of the ballistic missile defense system project may have a
significant impact on Alaskan telecommunication requirements and the Alaska
economy. The proposed system would be a fixed, land-based, non-nuclear missile
defense system with a land and space based detection system capable of
responding to limited strategic ballistic missile threats to the United States.
The preferred alternative is deployment of a system with up to 100 ground-based
interceptor silos and battle management command and control facilities at Fort
Greely, Alaska.

The United States Army Corps of Engineers awarded a construction contract in
2002 for test bed facilities. The contract is reported to contain basic
requirements and various options that could amount to $250 million in
construction, or possibly more, if all items are executed. Site preparation has
been underway at Fort Greely since August of 2001 and construction began on the
Fort Greely test bed shortly after the June 15, 2002 groundbreaking. The test
bed is due to be operational by September 30, 2004, though it may be operational
in the summer of 2004.

Tourism, air cargo, and service sectors have helped offset the prevailing
pattern of oil industry downsizing that has occurred during much of the last
several years.

We have, since our entry into the telecommunication marketplace, aggressively
marketed our services to seek a larger share of the available market. The
customer base in Alaska is limited, however, with a population of approximately
644,000 people. The State of Alaska's population is distributed as follows:

     o   42% are located in the Municipality of Anchorage,
     o   13% are located in the Fairbanks North Star Borough,
     o   10% are located in the Matanuska-Susitna Borough,
     o   5% are located in the City and Borough of Juneau, and
     o   The remaining 30% are located in other communities across the State of
         Alaska.

No assurance can be given that the driving forces in the Alaska economy, and in
particular, oil production, will continue at appropriate levels to provide an
environment for expanded economic activity.

                                       42
<PAGE>
No assurance can be given that oil companies doing business in Alaska will be
successful in discovering new fields or further developing existing fields which
are economic to develop and produce oil with access to the pipeline or other
means of transport to market, even with a reduced level of royalties. We are not
able to predict the effect of changes in the price and production volumes of
North Slope oil on Alaska's economy or on us.

Seasonality

Long-distance revenues (primarily those derived from our other common carrier
customers) have historically been highest in the summer months because of
temporary population increases attributable to tourism and increased seasonal
economic activity such as construction, commercial fishing, and oil and gas
activities. Cable television revenues are higher in the winter months because
consumers spend more time at home and tend to watch more television during these
months. Local access and Internet services do not exhibit significant
seasonality. Our ability to implement construction projects is also hampered
during the winter months because of cold temperatures, snow and short daylight
hours.

Schedule of Certain Known Contractual Obligations

The following table details future projected payments associated with our
certain known contractual obligations as of December 31, 2003, the date of our
most recent fiscal year-end balance sheet. Our schedule of certain known
contractual obligations has been updated to reflect our issuance of new Senior
Notes and redemption of our old Senior Notes.
<TABLE>
<CAPTION>
                                                                   Payments Due by Period
                                               ---------------------------------------------------------------
                                                                                                     More
                                                             Less than 1   1 to 3      4 to 5        Than 5
                                                   Total         Year      Years       Years         Years
                                               ------------- ----------- ---------- ------------ -------------
                                                                   (Amounts in thousands)
   <S>                                        <C>               <C>       <C>         <C>           <C>
   Long-term debt                             $   366,914          ---     32,168      89,002       245,744
   Interest on long-term debt                     190,026       17,838     36,250      36,250        99,688
   Capital lease obligations, including
    interest                                       61,902        8,448     19,201      15,775        18,478
   Operating lease commitments                     69,473       12,357     20,787      13,230        23,099
   Purchase obligations                            71,038       45,024     20,303       5,711           ---
                                               ------------- ----------- ---------- ------------ -------------
     Total contractual obligations            $   759,353       83,667    128,709     159,968       387,009
                                               ============= =========== ========== ============ =============
</TABLE>
For long-term debt included in the above table, we have included principal
payments on our new Senior Credit Facility and on our new Senior Notes. Interest
on amounts outstanding under our new Senior Credit Facility is based on variable
rates and therefore the amount is not determinable. Our old Senior Notes
required semi-annual interest payments of approximately $8.8 million through
February 2004, after which they were repaid using funds from the issuance of our
new Senior Notes. Our new Senior Notes require semi-annual interest payments of
approximately $9.1 million through February 2014. For a discussion of our
long-term debt, including the redemption of our old Senior Notes, issuance of
new Senior Notes and the use of proceeds from the issuance of new Senior Notes
to pay down our new

                                       43
<PAGE>
Senior Credit Facility, see note 5 to the accompanying "Notes to Interim
Condensed Consolidated Financial Statements."

For a discussion of our capital and operating leases, see note 16 to the "Notes
to Consolidated Financial Statements" included in Part II of our December 31,
2003 Form 10-K.

Purchase obligations at December 31, 2003 are further described in note 16 to
the "Notes to Consolidated Financial Statements" included in Part II of our
December 31, 2003 Form 10-K and include the following:

     o   The remaining construction commitment for our fiber optic cable system
         of $17.6 million,
     o   The remaining DLPS equipment purchase commitment of $17.4 million, and
     o   The remaining $16.0 million commitment for our Alaska Airlines
         agreement.

The contracts associated with these commitments are non-cancelable. Purchase
obligations also include other commitments for goods and services for capital
projects and normal operations which are not included in our Consolidated
Balance Sheets at December 31, 2003, because the goods had not been received or
the services had not been performed at December 31, 2003.

PART I.
ITEM 3.
           Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various types of market risk in the normal course of business,
including the impact of interest rate changes. We do not hold derivatives for
trading purposes.

Our new Senior Credit Facility carries interest rate risk. Amounts borrowed
under this Agreement bear interest at Libor plus 3.25%. Should the Libor rate
change, our interest expense will increase or decrease accordingly. On September
21, 2001, we entered into an interest rate swap agreement to convert $25.0
million of variable interest rate debt to 3.98% fixed rate debt plus applicable
margin. As of March 31, 2004, we have borrowed $121.2 million of which $96.2
million is subject to interest rate risk. On this amount, a 1% increase in the
interest rate would result in $962,000 in additional gross interest cost on an
annualized basis.

Our Satellite Transponder Capital Lease carries interest rate risk. Amounts
borrowed under this Agreement bear interest at Libor plus 3.25%. Should the
Libor rate change, our interest expense will increase or decrease accordingly.
As of March 31, 2004, we have borrowed $43.2 million subject to interest rate
risk. On this amount, a 1% increase in the interest rate would result in
$432,000 in additional gross interest cost on an annualized basis.

                                       44
<PAGE>
PART I.
ITEM 4.
                             Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation
of the effectiveness of the design and operation of our "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 ("Exchange Act")
Rules 13a-14(c) and 15d-14(c)) under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief Financial
Officer. Based upon that evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that our disclosure controls and procedures are
effective.

Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no significant changes in our internal controls or, to our knowledge,
in other factors that could significantly affect our disclosure controls and
procedures subsequent to the date we carried out this evaluation.

We may enhance, modify, and supplement internal controls and disclosure controls
and procedures based on experience.


PART II.   OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS

Information regarding pending legal proceedings to which we are a party is
included in note 7 to the accompanying "Notes to Interim Condensed Consolidated
Financial Statements" and is incorporated herein by reference.

                                       45
<PAGE>
PART II.
ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits -
<TABLE>
<CAPTION>
                       Exhibit No.                                        Description
                    --------------------------------------------------------------------------------------------------------
                        <S>           <C>
                        10.116        Audit Committee Charter (filed as Appendix I to the Company's Proxy Statement dated
                                        April 30, 2004)
                        10.117        Nominating and Corporate Governance Committee Charter
                        10.118        Code Of Business Conduct and Ethics
                        31            Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                                      302 of the Sarbanes-Oxley Act of 2002
                        32            Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                                      906 of the Sarbanes-Oxley Act of 2002
</TABLE>
               (b) Reports on Form 8-K filed during the quarter ended March 31,
                   2004 - None

                                       46
<PAGE>
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                    GCI, INC.
<TABLE>
<CAPTION>
              Signature                                        Title                                 Date
-------------------------------------       ------------------------------------------       -------------------
<S>                                         <C>                                                  <C>
/s/                                         President and Director                               May 3, 2004
-------------------------------------       (Principal Executive Officer)                    -------------------
Ronald A. Duncan

/s/                                         Vice President and Director                          May 3, 2004
-------------------------------------                                                        -------------------
G. Wilson Hughes

/s/                                         Secretary, Treasurer and Director                    May 3, 2004
-------------------------------------       (Principal Financial and Accounting              -------------------
John M. Lowber                              Officer)
</TABLE>

                                       47