As filed with the Securities and Exchange Commission on November 15, 1999.

                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 September 30,1999

                                       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) 265-5600


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  .

        Securities registered pursuant to Section 12(b) of the Act: None
          Securities registered pursuant to Section 12(g) of the Act:

                 $180,000,000 9.75% Senior Notes due August 2007



                                       1
<PAGE>
<TABLE>
                                                       GCI, INC.
                                A WHOLLY OWNED SUBSIDIARY OF GENERAL COMMUNICATION, INC.
                                                       FORM 10-Q
                                        FOR THE QUARTER ENDED SEPTEMBER 30, 1999

                                                         INDEX
                                                                                                    Page No.
                                                                                                    --------
<S>                                                                                                       <C>
Cautionary Statement Regarding Forward-Looking Statements.................................................3

PART I.  FINANCIAL INFORMATION

         Item l.    Consolidated Balance Sheets as of September 30, 1999
                       (unaudited) and December 31, 1998..................................................5

                    Consolidated Statements of Operations for the
                       three- and nine-month periods ended September 30, 1999
                       (unaudited) and 1998 (unaudited)...................................................7

                    Consolidated Statements of Stockholders' Equity
                       for the nine months ended September 30, 1999
                       (unaudited) and 1998 (unaudited)...................................................8

                    Consolidated Statements of Cash Flows for the
                       nine months ended September 30, 1999 (unaudited)
                       and 1998 (unaudited)...............................................................9

                    Notes to Interim Condensed Consolidated Financial
                       Statements.........................................................................10

         Item 2.    Management's Discussion and Analysis of Financial
                    Condition and Results of Operations...................................................18

         Item 3.    Quantitative and Qualitative Disclosures About
                    Market Risk...........................................................................39

PART II.  OTHER INFORMATION

         Item 1.    Legal Proceedings.....................................................................39

         Item 6.    Exhibits and Reports on Form 8-K......................................................39

         Other items are omitted as they are not applicable.

SIGNATURES................................................................................................40
</TABLE>


                                       2
<PAGE>
            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain   statements  in  this   quarterly   report  on  Form  10-Q   constitute
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation Reform Act of 1996 ("Securities Reform Act"). These statements may be
preceded  by,  followed  by,  or  include  the  words   "believes,"   "expects,"
"anticipates," or similar expressions.  For those statements,  GCI, Inc. and its
direct and indirect subsidiaries (collectively, the "Company") claims protection
of the safe-harbor for  forward-looking  statements  contained in the Securities
Reform Act. Such  forward-looking  statements  involve known and unknown  risks,
uncertainties  and other important  factors that could cause the actual results,
performance and  achievements  of the Company,  or industry  results,  to differ
materially from future results, performance or achievements expressed or implied
by such statements.  The reader is cautioned that important factors, such as the
following  risks,  uncertainties,  and  other  factors,  in  addition  to  those
contained  elsewhere  in this  document,  could  affect  future  results  of the
Company, its long-distance  telecommunication  services,  local access services,
Internet  services and cable  services  and could cause those  results to differ
materially from those expressed in the forward-looking statements:

     - Material adverse changes in the economic conditions in the markets served
       by the Company;
     - The  efficacy of the 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;
     - The Company's  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 local, cable and Internet  services;  the extent and pace at
       which different competitive  environments develop for each segment of the
       Company's  business;  the extent and duration for which  competitors  are
       able to offer  combined  or full  service  packages  prior to the Company
       being able to do so; the degree to which the Company experiences material
       competitive  impacts  to  its  traditional  service  offerings  prior  to
       achieving  adequate local service entry; and competitor  responses to the
       Company's  products and services and overall  market  acceptance  of such
       products and services;
     - The  outcome of  negotiations  with  Incumbent  Local  Exchange  Carriers
       ("ILECs") and state regulatory arbitrations and approvals with respect to
       interconnection agreements; and the ability to purchase unbundled network
       elements or wholesale services from ILECs at a price sufficient to permit
       the profitable offering of local exchange service at competitive rates;
     - Success  and market  acceptance  for new  initiatives,  many of which are
       untested;  the level and timing of the growth  and  profitability  of new
       initiatives,  particularly local access services,  Internet (consumer and
       business) services and wireless services;  start-up costs associated with
       introducing new products and entering new markets,  including advertising
       and  promotional  efforts;  successful  deployment  of  new  systems  and
       applications  to  support  new  initiatives;  and  local  conditions  and
       obstacles;
     - Uncertainties  inherent in new business strategies,  new product launches
       and  development  plans,   including  local  access  services,   Internet
       services, wireless services, digital video services, cable modem and high
       speed digital subscriber line services, and transmission services;
     - Rapid technological changes;

                                                                     (Continued)


                                       3
<PAGE>
CAUTIONARY STATEMENT (continued)



     - Development and financing of telecommunication,  local access,  wireless,
       Internet and cable networks and services;
     - 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;
     - Availability of qualified personnel;
     - 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;
     - The cost of the Company's Year 2000 compliance efforts;
     - Uncertainties  in federal  military  spending  levels and  military  base
       closures in markets in which the Company operates; and
     - Other risks detailed from time to time in the Company's  periodic reports
       filed with the Securities and Exchange Commission.

These  forward-looking  statements  (and  such  risks,  uncertainties  and other
factors)  are made only as of the date of this report and the Company  expressly
disclaims any obligation or undertaking to disseminate  any updates or revisions
to any  forward-looking  statement  contained  in this  document  to reflect any
change in the  Company's  expectations  with regard to those  statements  or any
other change in events,  conditions or circumstances on which any such statement
is based.  Readers  are  cautioned  not to put undue  reliance  on such  forward
looking statements.



                                       4
<PAGE>
PART I.  FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
                                              GCI, INC. AND SUBSIDIARIES
                                             CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                                                   (Unaudited)
                                                                                  September 30,     December 31,
                            ASSETS                                                    1999              1998
---------------------------------------------------------------------------     ----------------- -----------------
                                                                                      (Amounts in thousands)
<S>                                                                           <C>                      <C>
Current assets:
     Cash and cash equivalents                                                $       13,476            12,008
                                                                                ----------------- -----------------
     Receivables:
         Trade                                                                        44,062            38,890
         Income taxes                                                                    ---             4,262
         Other                                                                           296               412
                                                                                ----------------- -----------------
                                                                                      44,358            43,564
     Less allowance for doubtful receivables                                           2,996               887
                                                                                ----------------- -----------------
         Net receivables                                                              41,362            42,677

     Prepaid and other current assets                                                  3,519             2,212
     Deferred income taxes, net                                                        2,143             1,947
     Inventories                                                                       2,628             2,467
     Notes receivable                                                                    536               650
                                                                                ----------------- -----------------

         Total current assets                                                         63,664            61,961
                                                                                ----------------- -----------------

Property and equipment in service, net                                               303,488           199,827
Construction in progress                                                               3,042           118,806
                                                                                ----------------- -----------------
         Net property and equipment                                                  306,530           318,633
                                                                                ----------------- -----------------

Other assets:
     Cable franchise agreements, net of amortization                                 192,456           195,308
     Other intangible assets, net of amortization                                     44,154            45,391
     Deferred loan and senior notes costs, net of amortization                         9,145             9,877
     Transponder deposit (note 7)                                                      9,100             9,100
     Notes receivable                                                                  1,721             1,432
     Other assets, at cost, net of amortization (note 7)                              14,314             4,982
                                                                                ----------------- -----------------
         Total other assets                                                          270,890           266,090
                                                                                ----------------- -----------------

         Total assets                                                         $      641,084           646,684
                                                                                ================= =================
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.



                                       5                             (Continued)
<PAGE>
<TABLE>
                                               GCI, INC. AND SUBSIDIARIES
                                               CONSOLIDATED BALANCE SHEETS
                                                       (Continued)
<CAPTION>
                                                                                   (Unaudited)
                                                                                  September 30,     December 31,
             LIABILITIES AND STOCKHOLDERS' EQUITY                                     1999              1998
---------------------------------------------------------------------------    ------------------ -----------------
                                                                                       (Amounts in thousands)
   <S>                                                                        <C>                      <C>
   Current liabilities:
      Current maturities of long-term debt (note 3)                           $        1,927             1,799
      Current maturities of obligations under capital leases                             559               511
      Accounts payable                                                                23,675            27,550
      Accrued interest                                                                 3,394             8,072
      Accrued payroll and payroll related obligations                                  6,923             6,555
      Accrued liabilities (note 7)                                                     3,934             3,197
      Subscriber deposits and deferred revenues                                        6,868             5,300
                                                                               ------------------ -----------------
         Total current liabilities                                                    47,280            52,984

   Long-term debt, excluding current maturities (note 3)                             339,848           349,858
   Obligations under capital leases, including related party obligations,
      excluding current maturities                                                     1,249             1,675
   Deferred income taxes, net of deferred income tax benefit                          32,875            38,275
   Other liabilities                                                                   3,093             3,317
                                                                               ------------------ -----------------
         Total liabilities                                                           424,345           446,109
                                                                               ------------------ -----------------

   Stockholders' equity:
   Class A common stock (no  par). Authorized 10,000 shares; issued and
      outstanding 100 shares at September 30, 1999 and December 31, 1998             206,622           206,622
   Paid-in capital                                                                    25,008             2,933
   Retained deficit                                                                  (14,891)           (8,980)
                                                                               ------------------ -----------------
         Total stockholders' equity                                                  216,739           200,575
                                                                               ------------------ -----------------
   Commitments and contingencies (note 7)
         Total liabilities and stockholders' equity                           $      641,084           646,684
                                                                               ================== =================
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.



                                       6
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                                                              (Unaudited)                        (Unaudited)
                                                           Three Months Ended                 Nine Months Ended
                                                             September 30,                      September 30,
                                                         1999            1998               1999            1998
                                                     -------------- --------------     --------------- --------------
                                                            (Amounts in thousands, except per share amounts)
<S>                                                <C>                  <C>                <C>             <C>
Revenues (note 6)                                  $      67,340         62,766            212,337         183,859

Cost of sales and services                                30,233         29,690             92,445          86,360
Selling, general and administrative                       24,442         23,004             73,216          66,881
Depreciation and amortization                             10,757          8,342             32,481          25,004
                                                     -------------- --------------     --------------- --------------

     Operating income                                      1,908          1,730             14,195           5,614

Interest expense, net                                      7,610          4,987             22,730          14,698
                                                     -------------- --------------     --------------- --------------

     Net loss before income taxes and
       cumulative effect of a change in
       accounting principle                               (5,702)        (3,257)            (8,535)         (9,084)

Income tax benefit                                         2,165          1,181              2,968           3,326
                                                     -------------- --------------     --------------- --------------

     Net loss before cumulative effect of a
       change in accounting principle                     (3,537)        (2,076)            (5,567)         (5,758)

Cumulative effect of a change in accounting
   principle, net of income tax benefit of $245              ---            ---                344             ---
                                                     -------------- --------------     --------------- --------------

     Net loss                                      $      (3,537)        (2,076)            (5,911)         (5,758)
                                                     ============== ==============     =============== ==============

Basic loss per common share:
   Loss before cumulative effect of a change in
     accounting principle                          $     (35,370)       (20,760)           (55,670)        (57,580)
   Cumulative effect of a change in accounting
     principle                                               ---            ---              3,440             ---
                                                     -------------- --------------     --------------- --------------
     Net loss                                      $     (35,370)       (20,760)           (59,110)        (57,580)
                                                     ============== ==============     =============== ==============

Diluted loss per common share:
   Loss before cumulative effect of a change in
     accounting principle                          $     (35,370)       (20,760)           (55,670)        (57,580)
   Cumulative effect of a change in accounting
     principle                                               ---            ---              3,440             ---
                                                     -------------- --------------     --------------- --------------
     Net loss                                      $     (35,370)       (20,760)           (59,110)        (57,580)
                                                     ============== ==============     =============== ==============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.



                                       7
<PAGE>
<TABLE>
                                                     GCI, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                           NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

<CAPTION>

                                                            Shares of
(Unaudited)                                              Class A Common   Class A Common      Paid-in         Retained
(Amounts in thousands)                                        Stock           Stock           Capital          Deficit
                                                         -----------------------------------------------------------------
<S>                                                            <C>           <C>               <C>           <C>
Balances at December 31, 1997                                  100           $ 206,622            ---         (2,183)
Net loss                                                       ---                 ---            ---         (5,758)
Contribution from General Communication, Inc.                  ---                 ---            858            ---
                                                         -----------------------------------------------------------------
Balances at September 30, 1998                                 100           $ 206,622            858         (7,941)
                                                         =================================================================

Balances at December 31, 1998                                  100           $ 206,622          2,933         (8,980)
Net loss                                                       ---                 ---            ---         (5,911)
Contribution from General Communication, Inc. (note 4)         ---                 ---         22,075            ---
                                                         -----------------------------------------------------------------
Balances at September 30, 1999                                 100           $ 206,622         25,008        (14,891)
                                                         =================================================================
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.



                                       8
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                             (Unaudited)
                                                                                          Nine Months Ended
                                                                                            September 30,
                                                                                         1999           1998
                                                                                    -------------- --------------
                                                                                        (Amounts in thousands)
        <S>                                                                       <C>                 <C>
        Cash flows from operating activities:
          Net loss                                                                $     (5,911)         (5,758)
            Adjustments to reconcile net loss to net cash provided (used) by
              operating activities:
                Depreciation and amortization                                           32,481          25,004
                Amortization charged to costs of sales and service and
                  selling, general and administrative                                    1,339             696
                Deferred income tax benefit                                             (3,213)            (10)
                Deferred compensation and compensatory stock options                       501              51
                Non-cash cost of sales                                                   3,703             ---
                Bad debt expense (recoveries), net of write-offs                         2,109             (70)
                Employee Stock Purchase Plan expense funded with Class A
                  common stock issued by General Communication, Inc.                     1,770             414
                Write-off of unamortized start-up costs                                    589             ---
                Write-off of deferred debt issuance costs upon modification
                  of Senior Holdings Loan                                                  472             ---
                Other noncash income and expense items                                      17             127
                Change in operating assets and liabilities (note 2)                    (12,145)         (8,667)
                                                                                    -------------- --------------
                  Net cash provided by operating activities                             21,712          11,787
                                                                                    -------------- --------------

        Cash flows from investing activities:
           Purchases of property and equipment, including construction period
             interest                                                                  (28,627)       (130,167)
           Restricted cash investment                                                      ---          39,406
           Purchases of other assets                                                      (574)         (4,255)
           Notes receivable issued                                                        (454)         (1,576)
           Payments received on notes receivable                                           263           1,095
                                                                                    -------------- --------------
                  Net cash used in investing activities                                (29,392)        (95,497)
                                                                                    -------------- --------------

        Cash flows from financing activities:
          Long-term borrowings - bank debt and leases                                   13,776          89,219
          Repayments of long-term borrowings and capital lease obligations             (24,111)           (494)
          Payment of debt issuance costs and loan commitment fees                         (648)         (1,615)
          Cash contribution from General Communication, Inc.                            20,131           1,051
                                                                                    -------------- --------------
                  Net cash provided by financing activities                              9,148          88,161
                                                                                    -------------- --------------

                  Net increase in cash and cash equivalents                              1,468           4,451

                  Cash and cash equivalents at beginning of period                      12,008           3,048
                                                                                    -------------- --------------

                  Cash and cash equivalents at end of period                      $     13,476           7,499
                                                                                    ============== ==============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.



                                       9
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

 (1)       General

           Basis of Presentation
           GCI, Inc. was  incorporated  in 1997 to effect the issuance of senior
           notes as further  described in GCI, Inc.'s annual report on Form 10-K
           at December 31, 1998.  GCI,  Inc.,  as a wholly owned  subsidiary  of
           General  Communication,  Inc.  ("GCI"),  received through its initial
           capitalization  all ownership  interests in  subsidiaries  previously
           held by GCI.

           (a)   Business
                 GCI,  an Alaska  corporation,  was  incorporated  in 1979.  The
                 Company  offers   long-distance   telephone   service   between
                 Anchorage,  Fairbanks,  Juneau, and other communities in Alaska
                 and the remaining  United States and foreign  countries.  Cable
                 television   services   are  offered   throughout   Alaska  and
                 facilities-based  competitive local access services are offered
                 in Anchorage,  Alaska. The Company provides services to certain
                 common carriers terminating traffic in Alaska and certain other
                 points  in  the  remaining   United   States,   interstate  and
                 intrastate private line services,  Internet  services,  managed
                 services to certain commercial customers and sells and services
                 dedicated communications systems and related equipment. Private
                 network  point-to-point  data and voice  transmission  services
                 between Alaska, Hawaii and the western contiguous United States
                 are  offered and the  Company  owns and leases  capacity on two
                 undersea  fiber  optic  cables  used  in  the  transmission  of
                 interstate  private line,  switched message  long-distance  and
                 Internet  services  between  Alaska  and the  remaining  United
                 States and foreign countries.

           (b)   Organization
                 The consolidated  financial  statements include the accounts of
                 GCI, Inc.,  GCI, Inc.'s  wholly-owned  subsidiary GCI Holdings,
                 Inc.,  GCI  Holdings,   Inc.'s  wholly-owned  subsidiaries  GCI
                 Communication Corp., GCI Communication  Services,  Inc. and GCI
                 Cable, Inc., GCI Communication  Services,  Inc.'s  wholly-owned
                 subsidiary GCI Leasing Co., Inc., GCI Transport Company,  Inc.,
                 GCI Transport  Company,  Inc.'s  wholly-owned  subsidiaries GCI
                 Fiber Co., Inc. and Fiber Hold Company, Inc. and GCI Fiber Co.,
                 Inc.'s and Fiber Hold Company,  Inc.'s wholly owned partnership
                 Alaska United Fiber System Partnership.

           (c)   Net Loss Per Common Share
<TABLE>
                 Shares used to calculate  net loss per common share  consist of
                 the following (amounts in thousands):
<CAPTION>
                                                                  Three-Months Ended            Nine-Months Ended
                                                                    September 30,                 September 30,
                                                                   1999         1998             1999         1998
                                                               ------------ ------------    ------------- ------------
                    <S>                                             <C>          <C>             <C>           <C>
                    Weighted average common shares outstanding      100          100              100          100
                                                               ============ ============    ============= ============
</TABLE>
                 Basic and diluted loss per share  calculations at September 30,
                 1999  and  1998  are  based  on GCI,  Inc.'s  weighted  average
                 outstanding  shares of  common  stock  which  are not  publicly
                 traded.  GCI, Inc. has no outstanding  common stock equivalents
                 or weighted average shares  associated with  outstanding  stock
                 options.



                                       10                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

            (d)  Cumulative Effect of a Change in Accounting Principle
                 In April 1998,  the  American  Institute  of  Certified  Public
                 Accountants   issued   Statement  of  Position   ("SOP")  98-5,
                 "Reporting  on the  Costs  of  Start-Up  Activities".  SOP 98-5
                 provides guidance on the financial  reporting of start-up costs
                 and   organization   costs  and  requires   costs  of  start-up
                 activities and  organization  costs to be expensed as incurred.
                 SOP 98-5 is effective for financial statements for fiscal years
                 beginning  after  December 15, 1998.  Management of the Company
                 adopted SOP 98-5 in the first quarter of 1999  resulting in the
                 recognition  of a one-time  expense of $344,000  (net of income
                 tax  benefit of  $245,000)  associated  with the  write-off  of
                 unamortized start-up costs. Pro forma net loss and net loss per
                 common  share for the  nine-months  ended  September  30,  1998
                 approximate  amounts  reflected  in  the  accompanying  interim
                 condensed consolidated financial statements.

            (e)  Reclassifications
                 Reclassifications   have  been  made  to  the  1998   financial
                 statements to make them comparable with the 1999 presentation.

            (f)  Other
                 The  accompanying   unaudited  interim  condensed  consolidated
                 financial  statements  have been  prepared in  accordance  with
                 generally accepted accounting  principles for interim financial
                 information and with the  instructions to Form 10-Q and Article
                 10 of Regulation S-X.  Accordingly,  they do not include all of
                 the  information and footnotes  required by generally  accepted
                 accounting  principles for complete financial  statements.  The
                 interim condensed consolidated financial statements include the
                 consolidated  accounts  of  GCI,  Inc.  and  its  wholly  owned
                 subsidiaries (collectively, the "Company") with all significant
                 intercompany   transactions  eliminated.   In  the  opinion  of
                 management,  all  adjustments  (consisting of normal  recurring
                 accruals)  considered  necessary for a fair  presentation  have
                 been  included.  Operating  results for the  nine-month  period
                 ended September 30, 1999 are not necessarily  indicative of the
                 results  that may be expected  for the year ended  December 31,
                 1999.   For  further   information,   refer  to  the  financial
                 statements  and  footnotes  thereto  included in the  Company's
                 annual  report on Form  10-K for the year  ended  December  31,
                 1998.

(2)        Consolidated Statements of Cash Flows Supplemental Disclosures
<TABLE>
           Changes in operating  assets and  liabilities  consist of (amounts in
           thousands):
<CAPTION>
                Nine-month periods ended September 30,                                     1999          1998
                                                                                       ------------- ------------
                 <S>                                                                 <C>                <C>
                 Increase in trade and other receivables                             $    (3,765)       (7,355)
                 Decrease in income tax receivable                                         1,965           552
                 Increase in prepaid and other current assets                             (1,232)         (294)
                 Increase in inventory                                                      (710)         (233)
                 Increase (decrease) in accounts payable                                  (3,875)          223
                 Increase (decrease) in accrued liabilities                                   20          (243)
                 Increase in accrued payroll and payroll related obligations                 368         1,343
                 Decrease in accrued interest                                             (4,678)       (3,633)
                 Increase in deferred revenues                                               277           970
                 Increase (decrease) in other liabilities                                   (515)            3
                                                                                       ------------- ------------
                                                                                     $   (12,145)       (8,667)
                                                                                       ============= ============
</TABLE>


                                       11                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

           No income  taxes  were  paid  during  the  nine-month  periods  ended
           September  30, 1999 and 1998.  Income tax refunds of  $1,965,000  and
           $3,750,000  were  received   during  the  nine-month   periods  ended
           September 30, 1999 and 1998, respectively.

           Interest  paid  totaled   $28,652,000  and  $25,285,000   during  the
           nine-month periods ended September 30, 1999 and 1998, respectively.

(3)        Long-term Debt
           On January 27, 1998, the Company,  through Alaska United Fiber System
           Partnership  ("Alaska United"),  closed a $75,000,000 project finance
           facility  ("Fiber  Facility") to construct a fiber optic cable system
           connecting Anchorage, Fairbanks, Valdez, Whittier, Juneau and Seattle
           (see note 5). Borrowings under the Fiber Facility totaled $71,700,000
           at September 30, 1999.

(4)        Cash Contribution from GCI
           GCI  issued  20,000  shares  of  convertible   redeemable   accreting
           preferred  stock on April 30,  1999.  Proceeds  totaling  $20 million
           (before  payment of costs and  expenses)  were used for the Company's
           general  corporate  purposes,  to  repay  the  Company's  outstanding
           indebtedness,  and to provide  additional  liquidity for the Company.
           The Company's  amended Senior Holdings Loan  facilities  limit use of
           such proceeds.

(5)        Fiber Optic Cable System
           In early  February  1999 the Company  completed  construction  of its
           fiber optic cable system with commercial  services commencing at that
           time. The cities of Anchorage, Juneau and Seattle are connected via a
           subsea route. Subsea and terrestrial  connections  extended the fiber
           optic cable to Fairbanks  via  Whittier and Valdez.  The total system
           cost was approximately $125 million, portions of which were allocated
           to Cost of Sales in April 1999 and to Other  Assets in June 1999 (see
           note 7).

(6)        Industry Segments Data
           The  Company's  reportable  segments  are  business  units that offer
           different   products.   The  reportable  segments  are  each  managed
           separately  because  they  manage and offer  distinct  products  with
           different production and delivery processes.

           The Company has four reportable segments:

               Long-distance   services.   A  full   range   of   common-carrier
               long-distance services are offered to business, government, other
               telecommunications  companies and consumer customers, through its
               networks of fiber optic cables, digital microwave,  and fixed and
               transportable satellite earth stations.

               Cable services. The Company provides cable television services to
               residential,  commercial  and  government  users in the  State of
               Alaska.  The Company's  cable systems  serve 26  communities  and
               areas in Alaska, including the state's three largest urban areas,
               Anchorage, Fairbanks and Juneau. Anchorage and Juneau cable plant
               upgrades in 1998 and 1999  enabled  the Company to offer  digital
               cable television services and retail cable modem service (through
               its  Internet   services   segment)  in  Anchorage   and  Juneau,
               complementing its existing service  offerings.  The Company plans
               to expand its product  offerings as plant  upgrades are completed
               in other communities in Alaska.



                                       12                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

               Local access services.  The Company  introduced  facilities based
               competitive  local  exchange  services in Anchorage in 1997.  The
               Company  plans to  provide  similar  competitive  local  exchange
               services in Alaska's other major population centers.

               Internet  services.  The Company  began  offering  wholesale  and
               retail  Internet  services in 1998.  Deployment  of the new fiber
               optic  cable  system  (see note 5) allows  the  Company  to offer
               enhanced services with high-bandwidth requirements.

           Services  provided  by the Company  that are  included in the "Other"
           segment  in the tables  that  follow are  managed  services,  product
           sales, cellular telephone services,  and the results of insignificant
           business  units  described  above which do not meet the  quantitative
           thresholds  for  determining  reportable  segments.   None  of  these
           business  units  have  ever  met  the  quantitative   thresholds  for
           determining  reportable segments.  Also included in the Other segment
           is a  $19.5  million  sale  of  undersea  fiber  optic  cable  system
           capacity,   and  corporate  related  expenses  including   marketing,
           customer service, management information systems,  accounting,  legal
           and regulatory,  human resources and other general and administrative
           expenses.

           The Company  evaluates  performance and allocates  resources based on
           (1)   earnings   or  loss  from   operations   before   depreciation,
           amortization,  net  interest  expense,  income  taxes and  cumulative
           effect of a change in accounting principle,  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 included in the Company's December 31, 1998 annual report on
           Form 10-K.  Intersegment  sales are  recorded  at cost plus an agreed
           upon intercompany profit.

           All revenues are earned through sales of services and products within
           the United States of America.  All of the Company's long-lived assets
           are located within the United States of America.
<TABLE>
           Summarized financial information  concerning the Company's reportable
           segments  follows for the  nine-months  ended  September 30, 1999 and
           1998 (amounts in thousands):
<CAPTION>
                                                      Long-                   Local
                                                    Distance     Cable        Access     Internet
                                                    Services    Services     Services    Services      Other      Total
                                                   ------------------------------------------------------------------------
                              1999
                              ----
              <S>                                  <C>           <C>         <C>          <C>        <C>         <C>
              Revenues:
                Intersegment                       $  6,283       1,565        2,570          88         ---      10,506
                External                            119,223      45,189       11,323       6,521      30,081     212,337
                                                   ------------------------------------------------------------------------
                   Total revenues                  $125,506      46,754       13,893       6,609      30,081     222,843
                                                   ========================================================================

              Earnings (loss) from operations
                before depreciation, amortization,
                net interest expense, income taxes
                and cumulative  effect of a change
                in accounting principle            $ 45,549      24,555         232       (5,945)    (17,227)     47,164
                                                   ========================================================================

              Operating income (loss)              $ 33,443      11,386      (2,218)      (6,747)    (21,181)     14,683
                                                   ========================================================================
</TABLE>



                                       13                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Long-                   Local
                                                    Distance     Cable        Access     Internet
                                                    Services    Services     Services    Services      Other      Total
                                                   ------------------------------------------------------------------------
                              1998
                              ----
              <S>                                  <C>           <C>         <C>          <C>        <C>         <C>
              Revenues:
                Intersegment                       $  1,564       1,006         752          ---         ---       3,322
                External                            120,864      42,726       5,806        2,977      11,486     183,859
                                                   ------------------------------------------------------------------------
                   Total revenues                  $122,428      43,732       6,558        2,977      11,486     187,181
                                                   ========================================================================

              Earnings (loss) from operations
                before depreciation,
                amortization, net interest
                expense and income taxes           $ 45,660      21,855      (3,787)      (1,589)    (31,456)     30,683
                                                   ========================================================================

              Operating income (loss)              $ 38,602       9,659      (5,687)      (1,976)    (34,919)      5,679
                                                   ========================================================================
</TABLE>
<TABLE>
           A reconciliation  of total segment revenues to consolidated  revenues
           follows:
<CAPTION>
                 Nine-months ended September 30,                                    1999           1998
                                                                               ------------- --------------
                 <S>                                                          <C>                <C>
                 Total segment revenues                                       $    222,843       187,181
                 Less intersegment revenues eliminated in consolidation            (10,506)       (3,322)
                                                                               ------------- --------------
                      Consolidated revenues                                   $    212,337       183,859
                                                                               ============= ==============
</TABLE>
<TABLE>
           A  reconciliation  of total segment  earnings from operations  before
           depreciation,  amortization,  net interest expense,  income taxes and
           cumulative effect of a change in accounting principle to consolidated
           net loss before  income  taxes and  cumulative  effect of a change in
           accounting principle follows:
<CAPTION>
                 Nine-months ended September 30,                                    1999           1998
                                                                              -------------- --------------
                 <S>                                                          <C>                <C>
                 Total segment earnings from operations before depreciation,
                   amortization, net interest expense, income taxes and
                   cumulative effect of a change in accounting principle      $     47,164        30,683
                 Less intersegment contribution eliminated in consolidation           (488)          (65)
                                                                              -------------- --------------
                      Consolidated earnings from operations before
                        depreciation, amortization, net interest expense,
                        income taxes and cumulative effect of a change in
                        accounting principle                                        46,676        30,618
                 Depreciation and amortization                                      32,481        25,004
                                                                              -------------- --------------
                      Consolidated operating income                                 14,195         5,614
                 Interest expense, net                                             (22,730)      (14,698)
                                                                              -------------- --------------
                      Consolidated net loss before income taxes and
                        cumulative effect of a change in accounting
                        principle                                             $     (8,535)       (9,084)
                                                                              ============== ==============
</TABLE>


                                       14                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

<TABLE>
           A  reconciliation  of total segment  operating income to consolidated
           net loss before  income  taxes and  cumulative  effect of a change in
           accounting principle follows:
<CAPTION>
                 Nine-months ended September 30,                                    1999           1998
                                                                               ------------- --------------
                 <S>                                                          <C>                <C>
                 Total segment operating income                               $     14,683         5,679
                 Less intersegment contribution eliminated in consolidation           (488)          (65)
                                                                               ------------- --------------
                      Consolidated operating income                                 14,195         5,614
                 Interest expense, net                                             (22,730)      (14,698)
                                                                               -------------- --------------
                      Consolidated net loss before income taxes and
                        cumulative effect of a change in accounting
                        principle                                             $     (8,535)       (9,084)
                                                                               ============= ==============
</TABLE>
(7)        Commitments and Contingencies

           Future Sale
           An  agreement  was  executed  effective  July 1999 for a second $19.5
           million sale of fiber capacity to Alaska Communications  Systems. The
           agreement  requires  Alaska  Communications  Systems to acquire $19.5
           million of additional  capacity during the 18-month period  following
           the  effective  date  of the  contract.  Costs  associated  with  the
           capacity  to be sold  have  been  classified  as Other  Assets in the
           accompanying interim condensed  consolidated  financial statements at
           September 30, 1999.

           Deferred Compensation Plan
           The Company's  non-qualified,  unfunded  deferred  compensation  plan
           provides  a means  by  which  certain  employees  may  elect to defer
           receipt of designated  percentages  or amounts of their  compensation
           and provides a means for certain other deferrals of compensation. The
           Company may, at its discretion,  contribute  matching deferrals equal
           to  the  rate  of  matching  selected  by the  Company.  Participants
           immediately  vest in all elective  deferrals  and all income and gain
           attributable thereto.  Matching contributions and all income and gain
           attributable  thereto vest over a nine-year period.  Participants may
           elect to be paid in  either  a single  lump  sum  payment  or  annual
           installments  over a period not to exceed 10 years.  Vested  balances
           are payable upon termination of employment,  unforeseen  emergencies,
           death and total disability. Participants are general creditors of the
           Company  with  respect  to  deferred   compensation   plan  benefits.
           Compensation  totaling  $60,000  was  deferred  pursuant  to the plan
           during  the   nine-month   period  ended   September   30,  1999.  No
           compensation   was  deferred  during  the  nine-month   period  ended
           September 30, 1998.

           Satellite Transponders
           The  Company  entered  into  a  purchase  and  lease-purchase  option
           agreement   in  August  1995  for  the   acquisition   of   satellite
           transponders to meet its long-term  satellite capacity  requirements.
           The launch of the  satellite  is  currently  scheduled  for the first
           quarter of 2000.  The  Company  will  continue  to lease  transponder
           capacity  until the delivery of the new satellite  transponders.  The
           balance payable upon expected delivery of the transponders during the
           second  quarter of 2000,  in  addition  to the $9.1  million  deposit
           previously paid, totals approximately $43.5 million.



                                       15                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

           Self-Insurance
           The  Company  is  self-insured  for losses  and  liabilities  related
           primarily to health and welfare  claims up to  predetermined  amounts
           above which third party insurance  applies. A reserve of $585,000 was
           accrued at September 30, 1999 to cover  estimated  unreported  losses
           based on past experience  modified for current trends,  and estimated
           expenses for  investigating  and settling claims.  Actual losses will
           vary  from  the  recorded  reserve.  While  management  uses  what it
           believes is  pertinent  information  and factors in  determining  the
           amount of reserves, future additions to the reserves may be necessary
           due to changes in the information and factors used.

           Litigation and Disputes
           The Company is from time to time involved in various lawsuits,  legal
           proceedings  and  regulatory  matters  that have arisen in the normal
           course of  business.  While the  ultimate  results  of these  matters
           cannot be predicted with  certainty,  management does not expect them
           to have a material adverse effect on the financial position,  results
           of operations or liquidity of the Company.

           Cable Service Rate  Reregulation  Effective March 31, 1999, the rates
           for cable  programming  services  (service tiers above basic service)
           are no longer regulated. This regulation ended pursuant to provisions
           of the  Telecommunications  Act of 1996 and the  regulations  adopted
           pursuant thereto by the FCC.

           Federal law still permits regulation of basic service rates. However,
           Alaska law  provides  that cable  television  service is exempt  from
           regulation  by the RCA unless 25% of a system's  subscribers  request
           such  regulation  by filing a petition with the RCA. At September 30,
           1999,  only the Juneau  system is subject  to RCA  regulation  of its
           basic service rates. No petition requesting regulation has been filed
           for any other system. (The Juneau system serves 8.0% of the Company's
           total basic service  subscribers  at September  30,  1999.)  Juneau's
           current  rates have been  approved  by the RCA and there are no other
           pending filings with the RCA, therefore, there is no refund liability
           for basic service at this time.

           Year 2000
           In  1997,  the  Company  initiated  a plan to  identify,  assess  and
           remediate  Year 2000 issues within each of its  significant  computer
           programs and certain equipment that contain microprocessors. The plan
           is addressing  the issue of computer  programs and embedded  computer
           chips being unable to distinguish  between the year 1900 and the year
           2000,  if a program or chip uses only two digits  rather than four to
           define the applicable year. The Company has divided the plan into two
           major phases.  The first phase,  including team formation,  inventory
           assessment, compliance assessment and risk assessment, were completed
           during 1998. The second phase,  including resolution and remediation,
           validation,  contingency  planning  and sign-off  acceptance,  was in
           progress at September 30, 1999. Systems that have been determined not
           to be Year 2000 compliant are being either replaced or  reprogrammed,
           and thereafter tested for Year 2000 compliance. The conversion of all
           critical and service delivery systems is complete.  Through September
           30,  1999,  the Company has  expensed  $2.0  million for  incremental
           remediation costs (including  replacement  software and hardware) and
           testing,  as  set  forth  in the  plan,  with  remaining  incremental
           remediation   costs  and  testing  in  1999  and  2000  estimated  at
           approximately $750,000.



                                       16                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

           The Company is in the process of identifying and contacting  critical
           suppliers and customers whose computerized systems interface with the
           Company's  systems,  regarding their plans and progress in addressing
           their Year 2000 issues. The Company has received varying  information
           from such  third  parties  on the  state of  compliance  or  expected
           compliance.  Contingency  plans continue to be developed in the event
           that any critical supplier or customer is not compliant.  The failure
           to  correct  a  material   Year  2000  problem  could  result  in  an
           interruption in, or a failure of, certain normal business  activities
           or operations.  Such failures could  materially and adversely  affect
           the Company's operations,  liquidity and financial condition.  Due to
           the general uncertainty inherent in the Year 2000 problem,  resulting
           in  part  from  the   uncertainty  of  the  Year  2000  readiness  of
           third-party  suppliers  and  customers,  the  Company  is  unable  to
           determine at this time whether the consequences of Year 2000 failures
           will have a material impact on the Company's operations, liquidity or
           financial condition.



                                       17
<PAGE>
PART I.
ITEM 2.

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

The following  discussion and analysis  should be read in  conjunction  with the
Company's  Interim  Condensed  Consolidated  Financial  Statements and the notes
thereto. See - Cautionary Statement Regarding Forward-Looking Statements.

GCI,  Inc.  was  incorporated  in 1997 to effect the issuance of Senior Notes as
further described in the Company's 1998 annual report on Form 10-K. GCI, Inc., a
wholly-owned  subsidiary of GCI, received through its initial capitalization all
ownership  interests in  subsidiaries  previously  held by GCI.  Shares of GCI's
class A common stock are traded on the Nasdaq National Market tier of the Nasdaq
Stock  Market under the symbol  GNCMA.  Shares of GCI's class B common stock are
traded on the Over-the-Counter market.

                                    OVERVIEW

The Company has experienced significant growth in recent years through strategic
acquisitions,  deploying  new  business  lines,  and  expansion  of its existing
businesses.  The  Company  has  historically  met its cash needs for  operations
through  its  cash  flows  from  operating  activities.  Cash  requirements  for
acquisitions  and capital  expenditures  have been provided  largely through the
Company's financing activities.

Long-distance  services.  The Company's  provision of interstate  and intrastate
long-distance services to residential, commercial and governmental customers and
to other common carriers  (principally  MCI WorldCom,  Inc. ("MCI WorldCom") and
Sprint  Corporation  ("Sprint")),  and  provision  of  private  line and  leased
dedicated   capacity  services  accounted  for  96.3%  of  the  Company's  total
long-distance  services revenues during the third quarter of 1999.  Factors that
have the  greatest  impact on  year-to-year  changes in  long-distance  services
revenues  include the rate per minute  charged to customers  and usage  volumes,
usually expressed as minutes of use.

Revenues from private line and other data services sales increased 35.9% to $5.8
million  during the third quarter of 1999 as compared to the same period of 1998
due  primarily  to increased  system  capacity  and  increasing  demand for data
services by Internet  service  providers  ("ISP"),  commercial and  governmental
customers,  and others. Demand for data services to and from the lower 48 states
previously  exceeded  the  available  supply  capacity,  however  such demand is
beginning  to be filled with  uncompressed  fiber  optic  capacity on the Alaska
United fiber system.

The Company's long-distance cost of sales and services has consisted principally
of direct costs of providing  services,  including  local access charges paid to
Local Exchange Carriers  ("LECs") for originating and terminating  long-distance
calls in Alaska,  and fees paid to other  long-distance  carriers to carry calls
terminating in areas not served by the Company's network  (principally the lower
49 states,  most of which calls are carried  over MCI  WorldCom's  network,  and
international  locations,  which calls are  carried  principally  over  Sprint's
network).  During the third quarter of 1999, local access charges  accounted for
61.7%  of  long-distance  cost  of  sales  and  services,  fees  paid  to  other
long-distance  carriers  represented  22.8%,  satellite  transponder  lease  and
undersea fiber maintenance costs represented  13.2%, and other costs represented
2.3% of long-distance cost of sales and services.



                                       18                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

The Company's  long-distance selling,  general, and administrative expenses have
consisted  of  operating   and   engineering,   customer   service,   sales  and
communications,  management information systems, general and administrative, and
legal and regulatory expenses. Most of these expenses consist of salaries, wages
and  benefits of  personnel  and  certain  other  indirect  costs (such as rent,
travel,  utilities,  insurance and property  taxes).  A  significant  portion of
long-distance selling,  general, and administrative  expenses,  34.4% during the
third  quarter  of  1999,  represents  the  cost of the  Company's  advertising,
promotion and market analysis programs.

Long-distance  services face significant  competition  from AT&T Alascom,  Inc.,
long-distance  resellers,  and from local telephone  companies that have entered
the  long-distance  market.  The  number  of active  long-distance  residential,
commercial and small business customers  increased 6.2% at September 30, 1999 as
compared to September 30, 1998,  and increased  7.5% as compared to December 31,
1998. The Company  believes its approach to developing,  pricing,  and providing
long-distance  services and bundling  different  business  segment services will
continue to allow it to be competitive in providing those services.

Revenues derived from other common carriers  decreased 1.3% in the third quarter
of 1999 as compared to the third  quarter of 1998 due primarily to reduced rates
charged to such  carriers and a change in the mix of wholesale  minutes  carried
for such customers.  The Company secured contract  amendments  during the second
quarter of 1999 with MCI WorldCom and Sprint.  The  amendments  provided,  among
other  things,  for a three-year  contract term  extension  for Sprint.  The MCI
WorldCom  contact  expires in 2001.  Other common carrier  traffic routed to the
Company for termination in Alaska is largely  dependent on traffic routed to MCI
WorldCom and Sprint by their customers. Pricing pressures, new program offerings
and  market  consolidation  continue  to  evolve  in the  markets  served by MCI
WorldCom  and Sprint.  If, as a result,  their  traffic is reduced,  or if their
competitors' costs to terminate or originate traffic in Alaska are reduced,  the
Company's traffic will also likely be reduced,  and the Company's pricing may be
reduced to respond to  competitive  pressures.  The Company is unable to predict
the effect on the Company of such  changes,  however  given the  materiality  of
other common carrier revenues to the Company, a significant reduction in traffic
or pricing  could  have a material  adverse  effect on the  Company's  financial
position,  results of operations and liquidity. In October 1999 MCI WorldCom and
Sprint  announced their intention to merge. The Company is unable to predict the
outcome  or the  merger's  impact  on the  Company's  operations,  liquidity  or
financial condition.

Cable  services.  During the third quarter of 1999,  cable  television  revenues
represented  22.6%  of  consolidated   revenues.  The  cable  systems  serve  26
communities and areas in Alaska,  including the state's three largest population
centers, Anchorage, Fairbanks and Juneau.

The Company  generates cable services  revenues from three primary sources:  (1)
programming  services,  including  monthly  basic or premium  subscriptions  and
pay-per-view  movies or other  one-time  events,  such as sporting  events;  (2)
equipment rentals or installation;  and (3) advertising sales.  During the third
quarter of 1999  programming  services  generated  86.2% of total cable services
revenues,  equipment  rental and  installation  fees  accounted for 8.8% of such
revenues,  advertising  sales  accounted  for 4.5% of such  revenues,  and other
services accounted for the remaining 0.5% of total cable services revenues.  The
primary  factors  that  contribute  to  year-to-year  changes in cable  services
revenues are average monthly  subscription and pay-per-view rates, the mix among
basic, premium and pay-per-view  services, and the average number of subscribers
during a given reporting period.

The  cable  systems'  cost of sales  and  selling,  general  and  administrative
expenses has consisted principally of programming and copyright expenses, labor,
maintenance and repairs,  marketing and  advertising and rental expense.  During
the third quarter of 1999 programming and copyright  expenses  represented 42.9%
of total cable cost of sales and selling,  general and administrative  expenses,
and general and administrative costs


                                       19                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

represented  51.7% of such total.  Marketing and advertising  costs  represented
approximately 5.4% of such total expenses.

Cable  services  face  competition  from  alternative  methods of receiving  and
distributing  television signals and from other sources of news, information and
entertainment.  The Company believes its cable television services will continue
to be competitive based on providing, at reasonable prices, a greater variety of
programming  and other  communication  services  than are  available  off-air or
through  other  alternative   delivery  sources  and  upon  superior   technical
performance and customer service.

Local access services. The Company generates 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.  Effective March
1999 the Company  transitioned to the "bill and keep" cost settlement method for
termination of traffic on its and other's  facilities.  Local exchange  services
revenues totaled $3.8 million representing 5.7% of consolidated  revenues in the
third  quarter of 1999.  The primary  factors that  contribute  to  year-to-year
changes in local access services revenues are the average number of business and
residential  subscribers  to the  Company's  services  during a given  reporting
period and the average monthly rates charged for non-traffic sensitive services.

Operating and engineering expenses represented approximately 8.6% of total local
access services cost of sales and selling,  general and administrative  expenses
during the third quarter of 1999.  Marketing and advertising  costs  represented
approximately  1.0% of such total  expenses,  customer  service  and general and
administrative costs represented approximately 45.3% of such total expenses, and
local  access  cost of  sales  represented  approximately  45.1%  of such  total
expenses.  The Company  expects that it will generate net operating  losses from
local exchange services for the year ended December 31, 1999.

The Company's  local access services face  significant  competition in Anchorage
from Alaska  Communications  Systems and AT&T Alascom, Inc. The Company believes
its approach to developing,  pricing,  and providing  local access services will
allow it to be competitive in providing those services.

Internet  services.  The Company  began  offering  Internet  services in several
markets in Alaska during 1998. The Company generates  Internet services revenues
from three primary sources:  (1) access product services,  including  commercial
dedicated access ("DIAS"),  ISP DIAS, and retail dial-up service  revenues;  (2)
SchoolAccess(TM) DIAS and server revenues;  and (3) network management services.
Internet  services  revenues  totaled  $2.0 million  representing  3.0% of total
revenues in the third quarter of 1999.  The primary  factors that  contribute to
year-to-year  changes in Internet  services  revenues are the average  number of
subscribers  to the Company's  services  during a given  reporting  period,  the
average  monthly  subscription  rates,  and the  number  of  additional  premium
features selected.

Operating  and general and  administrative  expenses  represented  approximately
55.2%  of total  Internet  services  cost of  sales  and  selling,  general  and
administrative expenses during the third quarter of 1999. Internet cost of sales
represented  approximately  39.3%  of such  total  expenses  and  marketing  and
advertising represented approximately 5.5% of such total expenses.

Significant  new marketing  campaigns  have been  introduced  in 1999  featuring
bundled residential and commercial Internet products.  Additional  bandwidth was
made available to the Company's  Internet  segment  resulting from completion of
the Alaska United undersea fiber optic cable project. The new Internet offerings
are coupled with the Company's long-distance and local access services offerings
and provide free basic Internet services or discounted premium Internet services
if  certain   long-distance   or  local  access  services  plans  are  selected.
Value-added premium Internet features are available for additional charges.



                                       20                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

The Company competes with a number of Internet service providers in its markets.
The Company believes its approach to developing, pricing, and providing Internet
services will allow it to be competitive in providing those services.

Other  services,  other  expenses  and  net  loss.  Telecommunications  services
revenues  reported  in  the  Other  segment  as  described  in  note  6  to  the
accompanying interim condensed  consolidated  financial statements include sales
of fiber  optic  system  capacity  (see  below),  corporate  network  management
contracts,  telecommunications  equipment sales and service, other miscellaneous
revenues  (including  revenues from cellular resale  services,  from prepaid and
debit calling cards sales, and installation and leasing of customers' very small
aperture terminal ("Vsat") equipment).

During the second quarter of 1999 the Company  completed a $19.5 million sale of
long-haul  capacity in the Alaska  United  undersea  fiber  optic  cable  system
("fiber capacity sale") to Alaska Communications  Systems in a cash transaction.
The sale includes both capacity within Alaska,  and between Alaska and the lower
49 states.  Revenues and cost of sales  associated  with the  capacity  sale are
reported in the Other  services  segment.  The Company  announced in August 1999
that an agreement pertaining to a second $19.5 million sale of fiber capacity to
Alaska Communications  Systems had been executed.  The agreement requires Alaska
Communications Systems to acquire additional capacity during the 18-month period
following the effective date of the contract.

Other  services  segment  revenues  during  the third  quarter  of 1999  include
telecommunications  equipment sales totaling $1.7 million, network solutions and
outsourcing  revenues  totaling  $1.4  million,  and  cellular  resale and other
revenues totaling $778,000.

The  Company  began  developing  plans for PCS  service  deployment  in 1995 and
subsequently  conducted  a  technical  trial of its  candidate  technology.  The
Company has invested  approximately $2.2 million in its PCS license at September
30, 1999.  PCS licensees are required to offer service to at least  one-third of
their market population within five years or risk losing their licenses. Service
must be extended to two-thirds of the  population  within 10 years.  The Company
continues to evaluate its wireless  strategy and expects that such strategy will
allow retention of the PCS license pursuant to its terms.

Depreciation and  amortization  and interest expense on a consolidated  basis is
expected  to be higher in 1999 as  compared  to 1998  resulting  primarily  from
additional  depreciation  on 1998  and  1999  capital  expenditures,  additional
outstanding  long-term  debt  and a  reduction  in  the  amount  of  capitalized
construction  period interest following  placement of the Alaska United undersea
fiber optic cable into service in early February 1999. As a result,  the Company
anticipates recording net losses in 1999.



                                       21                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

                              RESULTS OF OPERATIONS

<TABLE>
The  following  table sets forth  selected  Statement  of  Operations  data as a
percentage  of total  revenues  for the  periods  indicated  and the  percentage
changes in such data as compared to the corresponding prior year period:

(Underlying data rounded to the nearest thousands)
<CAPTION>
                                                           Three Months Ended                     Nine Months Ended
                                                               September 30,                         September 30,
                                                                            Percentage                             Percentage
                                                                            Change (1)                             Change (1)
                                                                             1999 vs.                               1999 vs.
      (Unaudited)                                     1999        1998         1998          1999        1998         1998
                                                      ----        ----         ----          ----        ----         ----
      <S>                                            <C>         <C>         <C>            <C>         <C>          <C>
      Revenues
          Long-distance services                      63.0%       64.6%        4.6%          56.1%       65.7%        (1.4%)
          Cable services                              22.6%       23.1%        5.1%          21.3%       23.2%         5.8%
          Local access services                        5.7%        4.4%       40.1%           5.3%        3.2%        95.0%
          Internet services                            3.0%        2.2%       47.1%           3.1%        2.2%        60.5%
          Other services                               5.7%        5.7%        6.7%          14.2%        5.7%       189.3%
                                                 ------------------------------------------------------------------------------
             Total revenues                          100.0%      100.0%        7.3%         100.0%      100.0%        15.5%

      Cost of sales and services                      44.9%       47.3%        1.8%          43.5%       47.0%         7.0%
      Selling, general and administrative
        Expenses                                      36.3%       36.7%        6.3%          34.5%       36.4%         9.5%
      Depreciation and amortization                   16.0%       13.3%       28.9%          15.3%       13.6%        29.9%
                                                 ------------------------------------------------------------------------------
             Operating income                          2.8%        2.8%       10.3%           6.7%        3.1%       152.8%
             Net loss before income taxes and
               cumulative effect of a change in
               accounting principle                   (8.5%)      (5.2%)     (75.1%)         (4.0%)      (4.9%)        6.0%
             Net loss before cumulative effect
               of a change in accounting
               principle                              (5.3%)      (3.3%)     (70.4%)         (2.6%)      (3.1%)        3.3%
             Net loss                                 (5.3%)      (3.3%)     (70.4%)         (2.8%)      (3.1%)       (2.7%)
<FN>
   --------------------------
   (1)Percentage change in underlying data.
</FN>
</TABLE>
THREE MONTHS ENDED  SEPTEMBER 30, 1999  ("1999")  COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998 ("1998")

Revenues.  Total  revenues  increased  7.3% from $62.8  million in 1998 to $67.3
million  in  1999.   Long-distance   revenues  from   commercial,   residential,
governmental,  and other  common  carrier  customers  increased  4.6% from $40.6
million in 1998 to $42.4 million in 1999.  Long-distance  revenues increased due
to a 6.2%  increase  in the number of active  residential,  small  business  and
commercial  customers  billed  from  83,000 at  September  30, 1998 to 88,100 at
September 30, 1999, new revenues in 1999 totaling $1.5 million from the lease of
three DS3 circuits on Alaska United facilities within Alaska, and between Alaska
and the lower 48 states and maintenance  charges related to the portion of fiber
capacity  purchased  by  Alaska


                                       22                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

Communications  Systems,  a 22.0% increase in interstate minutes of use to 208.1
million  minutes,  and a 6.5%  increase  in  intrastate  minutes  of use to 38.1
million minutes.

The increase in long-distance revenues was partially offset by a 22.9% reduction
in the Company's  average rate per minute on  long-distance  traffic from $0.166
per minute in 1998 to $0.128 per minute in 1999.  Changes in  wholesale  product
mix and reduced rates on other common carrier traffic  (principally MCI WorldCom
and Sprint)  offset  other common  carrier  wholesale  minutes  growth of 31.8%,
resulting in a 1.2%  decrease in revenues,  from $16.5  million in 1998 to $16.3
million  in  1999.  The  decrease  in rates  also  resulted  from the  Company's
promotion of and customers'  enrollment in new calling plans offering discounted
rates and length of service  rebates,  such new plans being  prompted in part by
the Company's primary long-distance competitor, AT&T Alascom, reducing its rates
and entry of LECs into long-distance markets served by the Company.

Revenues from private line and other data services sales increased 35.9% to $5.8
million  during the third quarter of 1999 as compared to the same period of 1998
due  primarily  to increased  system  capacity  and  increasing  demand for data
services by ISPs, commercial and governmental customers,  and others. Demand for
data services to and from the lower 48 states previously  exceeded the available
supply capacity, however such demand is beginning to be filled with uncompressed
fiber optic capacity on the Alaska United fiber system.

Cable  revenues  increased  5.1% from $14.5  million in 1998 to $15.2 million in
1999.  Programming  services  revenues  increased  6.2% to $13.1 million in 1999
resulting from an increase of approximately  5,500 basic  subscribers  served by
the Company at September 30, 1999 as compared to September 30, 1998, an increase
of $0.79 in average  gross revenue per average  basic  subscriber  per month and
increased  pay-per-view and premium service revenues.  New facility construction
efforts in the summer of 1998 resulted in  approximately  1,900 additional homes
passed which  contributed to additional  subscribers and revenues in 1999. Other
factors  included  facility  upgrades which allowed the  introduction of digital
cable services in Anchorage in the fourth quarter of 1998, increased promotional
and  advertising  efforts  in the  fourth  quarter  of 1998 and the first  three
quarters of 1999,  and  increases in basic and premium  service rates in certain
locations.  Equipment rental and installation  revenues  increased 19.0% to $1.3
million in 1999 due to increased  equipment  rentals and  installation  services
provided by the Cable services industry segment.

Local access services revenues increased 40.1% from $2.7 million in 1998 to $3.8
million in 1999.  At  September  30,  1999  approximately  41,000  lines were in
service and approximately 1,400 additional lines were awaiting connection.

Internet services revenues (including SchoolAccess(TM) services) increased 47.1%
from $1.4 million in 1998 to $2.0 million in 1999. The Company had approximately
39,000 active  residential,  commercial and small business  retail and wholesale
dial-up subscribers to its Internet service at September 30, 1999.

Other services revenues increased 6.7% from $3.6 million in 1998 to $3.9 million
in 1999.

Cost of sales and services.  Cost of sales and services totaled $29.7 million in
1998 and $30.2 million in 1999. As a percentage of total revenues, cost of sales
and services decreased from 47.3% in 1998 to 44.9% in 1999. The decrease in cost
of sales and services as a percentage of revenues is primarily attributed to the
changes  in the  Company's  product  mix due to  continuing  development  of new
product  lines and growth of existing  product  lines  (local  access  services,
long-distance data services and Internet).  The margin improvement was partially
offset  by  increased  cable  services  cost of sales as a  percentage  of cable
services revenues.



                                       23                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

Long-distance cost of sales as a percentage of long-distance  revenues decreased
from 51.2% in 1998 to 47.1% in 1999.  The  decrease is primarily  attributed  to
reductions in access costs due to avoidance of access charges resulting from the
Company's distribution and termination of its traffic on its own network instead
of paying other  carriers to distribute  and terminate its traffic.  The Company
expects to realize  additional  cost savings as traffic carried on its own local
services  facilities grows.  Additional capacity between Alaska and the lower 49
states now  available on the Alaska  United fiber system has allowed the Company
to carry  significant  additional  amounts of data  services  traffic on its own
facilities  rather than paying  other  carriers for leased  capacity.  Partially
offsetting  the 1999  decrease as compared to 1998 are  decreases in the average
rate per minute  billed to  customers  without a  comparable  decrease in access
charges paid by the Company.

Cable cost of sales and services as a percentage  of revenues is generally  less
than are  long-distance,  local access and Internet  services  cost of sales and
services as a percentage of revenues. Cable services rate increases did not keep
pace with  increases in  programming  and copyright  costs in 1999.  Programming
costs  increased on most of the  Company's  offerings  and the Company  incurred
additional costs on new programming  introduced in 1998 and 1999. Changes in the
product mix provided to customers  also impacts cable cost of sales and services
as a percentage of revenues.

Local access  services  cost of sales and services  totaled 56.9% and 60.5% as a
percentage  of 1999 and  1998  local  access  services  revenues,  respectively.
Internet  services  cost of sales  and  services  totaled  43.9%  and 41.3% as a
percentage of the 1999 and 1998 Internet services  revenues,  respectively.  The
Company's  local  access  operations  commenced  in 1997 and  Internet  services
operations  commenced in 1998.  Fluctuations  in cost of sales and services as a
percentage  of revenues are expected to occur as new product  lines  continue to
develop and mature.

Selling,   general   and   administrative   expenses.   Selling,   general   and
administrative  expenses  increased  6.3% from  $23.0  million  in 1998 to $24.4
million in 1999. The 1999 increase resulted from:

     - Increased costs  associated with operations and maintenance of the Alaska
       United  fiber  optic cable  system that was placed into  service in early
       February 1999.  1999 costs totaled $1.1 million as compared to $37,000 in
       1998.
     - Internet services  operating,  engineering,  sales,  customer service and
       administrative cost increases,  from $154,000 in 1998 as compared to $1.4
       million in 1999. The Company  gradually  introduced its Internet services
       through the third  quarter of 1998 and increased  advertising  efforts in
       the fourth  quarter of 1998 and the first  three  quarters  of 1999.  The
       increase in costs was necessary to provide the  operations,  engineering,
       customer  service and support  infrastructure  necessary  to  accommodate
       expected growth in the Company's Internet services customer base.
     - Increased allowance for doubtful accounts receivable.

The 1999 increase in selling,  general and administrative  expenses is partially
offset by decreases  in local access  services  operating,  engineering,  sales,
customer  service and  administrative  costs,  from $3.4 million in 1998 to $2.6
million  in  1999.  Additional  costs  were  necessary  in 1998 to  process  the
significant  number of conversions and new  installations due to the high demand
for the Company's  local access  services.  The Company has been able to provide
the necessary operating,  engineering, customer service and administrative costs
more efficiently in 1999, resulting in cost reductions.

Consolidated  selling,  general and administrative  expenses, as a percentage of
consolidated revenues, decreased from 36.7% in 1998 to 36.3% in 1999.

Depreciation and amortization.  Depreciation and amortization  expense increased
28.9%  from $8.3  million  in 1998 to $10.8  million in 1999.  The  increase  is
attributable  to  the  Company's  $58.4  million  investment  in


                                       24                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

equipment and  facilities  placed into service during 1998 for which a full year
of  depreciation  will be recorded during 1999, the Alaska United undersea fiber
optic cable system placed into service in the first quarter of 1999 for which 11
months of  depreciation  will be recorded  during  1999,  and the $28.6  million
investment in equipment and  facilities  during the first three quarters of 1999
for which a partial year of depreciation will be recorded in 1999.

Interest expense, net. Interest expense, net of interest income, increased 52.0%
from $5.0  million  in 1998 to $7.6  million  in 1999.  This  increase  resulted
primarily  from  increases in the  Company's  average  outstanding  indebtedness
associated  with  construction  of new  long-distance  and Internet  facilities,
expansion  and  upgrades of cable  television  facilities,  investment  in local
access services equipment and facilities,  and slightly higher interest rates on
outstanding  indebtedness.  During 1998  interest  expense was offset in part by
capitalized construction period interest.  During 1999 the Company experienced a
significant  reduction in the amount of construction period interest capitalized
due to the  completion  of the Alaska United  undersea  fiber optic cable system
that was placed into service in early February 1999.

Income tax benefit.  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.  Income tax
benefit  totaled $1.2 million in 1998 and $2.2 million in 1999.  The increase in
income tax  benefit in 1999 was due to an  increase  in net loss  before  income
taxes  and  cumulative  effect of a change in  accounting  principle  in 1999 as
compared to 1998. The Company's  effective  income tax rate increased from 36.3%
in 1998 to 38.0%  in 1999  due to the  proportional  amount  of  items  that are
nondeductible for income tax purposes.

NINE MONTHS  ENDED  SEPTEMBER  30, 1999  ("1999")  COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998 ("1998")

Revenues.  Total revenues  increased 15.5% from $183.9 million in 1998 to $212.3
million  in  1999.   Long-distance   revenues  from   commercial,   residential,
governmental,  and other common  carrier  customers  decreased  1.4% from $120.9
million in 1998 to $119.2  million  in 1999.  Long-distance  revenues  decreased
notwithstanding  a 7.5%  increase  in the  number of active  residential,  small
business  and  commercial  customers  billed from 82,000 at December 31, 1998 to
88,100 at September 30, 1999, a 10.3%  increase in total minutes of use to 661.7
million  minutes,  and new revenues in 1999 totaling $3.2 million from the lease
of three DS3 circuits on Alaska United  facilities  within  Alaska,  and between
Alaska and the lower 49 states and maintenance charges related to the portion of
fiber capacity purchased by Alaska Communications Systems.

The long-distance revenue decrease was primarily due to a 16.6% reduction in the
Company's  average  rate per minute on  long-distance  traffic  from  $0.169 per
minute in 1998 to $0.141 per minute in 1999. The decrease in rates resulted from
the  Company's  promotion  of and  customers'  enrollment  in new calling  plans
offering  discounted rates and length of service  rebates,  such new plans being
prompted  in  part  by the  Company's  primary  long-distance  competitor,  AT&T
Alascom,  reducing its rates, and the entry of LECs into  long-distance  markets
served by the  Company.  Changes in wholesale  product mix and reduced  rates on
other common carrier traffic  (principally MCI WorldCom and Sprint) offset other
common carrier minutes growth of 18.3% resulting in a 1.3% decrease in revenues,
from $46.7 million in 1998 to $46.1 million in 1999.

Cable  revenues  increased  5.8% from $42.7  million in 1998 to $45.2 million in
1999.  Programming  services  revenues  increased  5.3% to $38.7 million in 1999
resulting from an increase of approximately  5,500 basic  subscribers  served by
the  Company,  an increase of $1.4 in average  gross  revenue per average  basic
subscriber per month and increased  pay-per-view  and premium service  revenues.
New  facility   construction


                                       25                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

efforts in the summer of 1998 resulted in  approximately  1,900 additional homes
passed which  contributed to additional  subscribers and revenues in 1999. Other
factors  included  facility  upgrades which allowed the  introduction of digital
cable services in Anchorage in the fourth quarter of 1998, increased promotional
and  advertising  efforts  in the  fourth  quarter  of 1998 and the first  three
quarters of 1999,  and  increases in basic and premium  service rates in certain
locations  in the  second  and  third  quarter  of 1998.  Equipment  rental  and
installation  revenues  increased 19.7% to $3.9 million in 1999 due to increased
equipment  rentals and  installation  services  provided  by the Cable  services
industry segment.

Local  access  services  revenues  increased  95.0% from $5.8 million in 1998 to
$11.3 million in 1999. At September 30, 1999 approximately  41,000 lines were in
service and approximately 1,400 additional lines were awaiting connection.

Internet services revenues (including SchoolAccess(TM) services) increased 60.5%
from $4.1 million in 1998 to $6.5 million in 1999. The Company had approximately
39,000 active  residential,  commercial and small business  retail and wholesale
dial-up subscribers to its Internet service at September 30, 1999.

Other  services  revenues  increased  189.3% from $10.4 million in 1998 to $30.1
million in 1999. The 1999 increase was largely due to the fiber capacity sale as
previously described.

Cost of sales and services.  Cost of sales and services totaled $86.4 million in
1998 and $92.4 million in 1999. As a percentage of total revenues, cost of sales
and services decreased from 47.0% in 1998 to 43.5% in 1999. The decrease in cost
of sales and services as a percentage of revenues is primarily attributed to the
impact of the fiber  capacity sale and changes in the Company's  product mix due
to continuing  development  of new product lines and growth of existing  product
lines (local access  services,  data services and Internet).  The overall margin
improvement was partially  offset by increased cable services cost of sales as a
percentage of cable services revenues.

Long-distance cost of sales and services increased from $60.4 million in 1998 to
$60.7  million  in  1999.  Increases  in the  long-distance  cost of  sales as a
percentage  of  long-distance  revenues  from 50.0% in 1998 to 52.4% in 1999 are
primarily  attributed  to the decrease in the average rate per minute  billed to
customers  without a comparable  decrease in access charges paid by the Company,
and a  non-recurring  refund  received  in the second  quarter of 1998  totaling
approximately  $1.1  million  from a local  exchange  carrier  in respect of its
earnings that exceeded regulatory requirements.  Offsetting the 1999 increase as
compared  to 1998 are  reductions  in access  costs due to  avoidance  of access
charges resulting from the Company's distribution and termination of its traffic
on its own local services network instead of paying other carriers to distribute
and terminate its traffic. The Company expects increased cost savings as traffic
carried on its own facilities  continues to grow.  Additional  capacity  between
Alaska and the lower 48 states now  available on the Alaska  United fiber system
has allowed the Company to carry significant additional amounts of data services
traffic on its own  facilities  rather than  paying  other  carriers  for leased
capacity.

Cable  cost of sales and  services  as a  percentage  of  revenues  is less as a
percentage  of  revenues  than are  long-distance,  local  access  and  Internet
services cost of sales and services.  Cable services rate increases did not keep
pace with  increases in  programming  and copyright  costs in 1999.  Programming
costs  increased on most of the  Company's  offerings  and the Company  incurred
additional costs on new programming introduced in 1998 and 1999.

Local access  services  cost of sales and services  totaled 52.1% and 65.1% as a
percentage  of 1999 and  1998  local  access  services  revenues,  respectively.
Internet  services  cost of sales  and  services  totaled  33.9%  and 67.9% as a
percentage of the 1999 and 1998 Internet services  revenues,  respectively.  The
Company's  local  access  operations  commenced  in 1997 and  Internet  services
operations  commenced in 1998.  Fluctuations  in


                                       26                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

cost of sales and services as a percentage  of revenues are expected to continue
to occur as new product lines develop and mature.

Selling,   general   and   administrative   expenses.   Selling,   general   and
administrative  expenses  increased  9.5% from  $66.9  million  in 1998 to $73.2
million in 1999. The 1999 increase resulted from:

     - Increased costs  associated with operations and maintenance of the Alaska
       United  fiber  optic cable  system that was placed into  service in early
       February 1999. 1999 costs totaled $3.0 million as compared to $107,000 in
       1998.
     - Internet services  operating,  engineering,  sales,  customer service and
       administrative cost increases,  from $379,000 in 1998 as compared to $3.9
       million in 1999. The Company  gradually  introduced its Internet services
       through the third  quarter of 1998 and increased  advertising  efforts in
       the fourth  quarter of 1998 and first three  quarters of 1999.  Increased
       costs were  necessary to provide the  operations,  engineering,  customer
       service and support  infrastructure  necessary  to  accommodate  expected
       growth in the Company's Internet services customer base.
     - Increased allowance for doubtful accounts receivable.

Partially   offsetting   these  increases  was  a  $2.2  million   reduction  in
long-distance general and administrative costs in 1999 as compared to 1998.

Selling,  general and  administrative  expenses,  as a  percentage  of revenues,
decreased  from  36.4%  in 1998  to  34.5%  in 1999  primarily  as a  result  of
significant   revenues   derived  from  the  fiber   capacity   sale  without  a
proportionate increase in selling, general and administrative expenses.

Depreciation and amortization.  Depreciation and amortization  expense increased
29.9% from $25.0  million in 1998 to $32.5  million  in 1999.  The  increase  is
attributable  to  the  Company's  $58.4  million  investment  in  equipment  and
facilities placed into service during 1998 for which a full year of depreciation
will be recorded  during  1999,  the Alaska  United  undersea  fiber optic cable
system  placed into service in the first  quarter of 1999 for which 11 months of
depreciation  will be recorded during 1999, and the $28.6 million  investment in
equipment  and  facilities  during the first three  quarters of 1999 for which a
partial year of depreciation will be recorded in 1999.

Interest expense, net. Interest expense, net of interest income, increased 54.4%
from $14.7  million in 1998 to $22.7  million in 1999.  This  increase  resulted
primarily  from  increases in the  Company's  average  outstanding  indebtedness
resulting   primarily  from  construction  of  new  long-distance  and  Internet
facilities, expansion and upgrades of cable television facilities, investment in
local access  services  equipment and  facilities,  and slightly higher interest
rates on outstanding  indebtedness.  During 1998 interest  expense was offset in
part by  capitalized  construction  period  interest.  During  1999 the  Company
experienced  a  significant  reduction  in the  amount  of  construction  period
interest  capitalized  due to the completion of the Alaska United undersea fiber
optic cable that was placed into  service in early  February  1999.  The Company
charged to interest expense  $470,000 of deferred  financing costs in the second
quarter of 1999  resulting  from the amendment to the Holdings  Loan  Facilities
which reduced borrowing capacity (see Liquidity and Capital Resources).

Income tax benefit.  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
discussions of income tax expense and net operating loss  carryforwards  reflect
the  consolidated  group's activity and balances.  Income tax benefit  decreased
from $3.3  million  in 1998 to $3.0  million  in 1999 due to a reduced  net loss
before income taxes and cumulative effect of a change in accounting principle in
1999 as compared to 1998. The Company's effective income tax rate decreased from



                                       27                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

36.6%  in  1998  to  34.8%  in  1999  due to the  decreased  net  loss  and  the
proportional amount of items that are nondeductible for income tax purposes.

At September 30, 1999, the Company has (1) tax net operating loss  carryforwards
of approximately $66.0 million that will begin expiring in 2008 if not utilized,
and (2)  alternative  minimum tax credit  carryforwards  of  approximately  $2.0
million  available to offset regular  income taxes payable in future years.  The
Company's  utilization of remaining net operating loss  carryforwards is subject
to certain 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  taxable  income  earned in  carryback
years,  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. The Company estimates that its effective income
tax rate for financial statement purposes will be approximately 34% in 1999. The
Company expects that its operations will generate net income before income taxes
during the carryforward  periods to allow utilization of loss  carryforwards for
which no allowance has been established.

     FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
<TABLE>
The following  chart provides  selected  unaudited  statement of operations data
from the Company's quarterly results of operations during 1999 and 1998:
<CAPTION>
                                                       First       Second         Third         Fourth        Total
(Unaudited)                                           Quarter      Quarter       Quarter        Quarter        Year
                                                 -----------------------------------------------------------------------
                    1999                                    (Dollars in thousands, except per share amounts)
                    ----
<S>                                            <C>                  <C>          <C>                           <C>
Revenues:
   Long-distance services                      $      37,568        39,158        42,497                       119,223
   Cable services                                     15,062        14,909        15,218                        45,189
   Local access services                               3,714         3,764         3,845                        11,323
   Internet services                                   1,969         2,534         2,018                         6,521
   Other services                                      3,025        23,294         3,762                        30,081
                                                 -----------------------------------------------------------------------
Total revenues                                        61,338        83,659        67,340                       212,337
Operating income (loss)                                 (368)       12,655         1,908                        14,195
Net income (loss) before income taxes and
  cumulative effect of a change in
  accounting principle                                (7,328)        4,495        (5,702)                       (8,535)
Net income (loss) before cumulative effect
  of a change in accounting principle                 (4,521)        2,491        (3,537)                       (5,567)
Net income (loss)                              $      (4,865)        2,491        (3,537)                       (5,911)
                                                 =======================================================================

Basic net income (loss) per share:
   Net income (loss) before cumulative
     effect of a change in accounting
     principle                                 $     (45,210)       24,910       (35,370)                      (55,670)
   Cumulative effect of a change in
     accounting principle                              3,440           ---           ---                         3,440
                                                 -----------------------------------------------------------------------
   Net income (loss)                           $     (48,650)       24,910       (35,370)                      (59,110)
                                                 =======================================================================
</TABLE>


                                       28                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
The following  chart provides  selected  unaudited  statement of operations data
from the Company's quarterly results of operations during 1999 and 1998:
<CAPTION>
                                                       First       Second         Third         Fourth        Total
(Unaudited)                                           Quarter      Quarter       Quarter        Quarter        Year
                                                 -----------------------------------------------------------------------
<S>                                            <C>                 <C>           <C>            <C>            <C>
Diluted net income (loss) per share:
   Net income (loss) before cumulative
     effect of a change in accounting
     principle                                 $     (45,210)       24,910       (35,370)                      (55,670)
   Cumulative effect of a change in
     accounting principle                              3,440           ---           ---                         3,440
                                                 -----------------------------------------------------------------------
   Net income (loss)                           $     (48,650)       24,910       (35,370)                      (59,110)
                                                 =======================================================================

                    1998
                    ----
Revenues:
   Long-distance services                      $      38,651        41,366        40,847         36,486        157,350
   Cable services                                     14,201        14,041        14,484         14,914         57,640
   Local access services                               1,013         2,049         2,744          4,102          9,908
   Internet services                                     903         1,014         1,060          1,614          4,591
   Other services                                      3,384         4,471         3,631          5,820         17,306
                                                 -----------------------------------------------------------------------
Total revenues
Operating income                                       2,437         1,447         1,730          3,230          8,844
Net loss                                       $      (1,616)       (2,066)       (2,076)        (1,039)        (6,797)
                                                 =======================================================================
Basic net loss per share                       $     (16,160)      (20,660)      (20,760)       (10,390)       (67,970)
                                                 =======================================================================
Diluted net loss per share                     $     (16,160)      (20,660)      (20,760)       (10,390)       (67,970)
                                                 =======================================================================
</TABLE>
Revenues.  Total  revenues  for the quarter  ended  September  30, 1999  ("third
quarter of 1999") were $67.3  million,  representing a 19.6% decrease from total
revenues in the quarter ended June 30, 1999 ("second  quarter of 1999") of $83.7
million.  The decrease in total  revenues  resulted  from a $19.5  million fiber
capacity sale in the second quarter of 1999, reduced revenues  associated with a
6.2% reduction in the long-distance  average rate per minute,  notwithstanding a
10.0% increase in total minutes of traffic  carried.  Partially  offsetting this
decrease  were   increased   revenues  from  sales  to  other  common   carriers
(principally MCI WorldCom and Sprint) due to a 15.5% increase in minutes carried
for other common carriers.  Revenues from other common carriers (principally MCI
WorldCom  and Sprint)  totaled  $16.3  million in the third  quarter of 1999 and
$14.9 million in the second quarter of 1999.

Long-distance  revenues have historically been highest in the summer months as a
result 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, on the other hand, are higher in the
winter months because  consumers  spend more time at home and tend to watch more
television  during these months.  Local service  operations  are not expected to
exhibit  significant  seasonality.  The Company's  Internet  access services are
expected to reflect  seasonality trends similar to the cable television segment.
The Company's ability to implement construction projects is also hampered during
the winter months because of cold temperatures, snow and short daylight hours.

Cost of sales and  services.  Cost of sales and  services  decreased  12.0% from
$34.3  million  in the  second  quarter  of 1999 to $30.2  million  in the third
quarter of 1999. The decrease resulted  primarily from costs associated with the
fiber  capacity sale in the second quarter of 1999. As a percentage of revenues,
second quarter of 1999 cost of sales and services was 41.1% as compared to 44.9%
for the third quarter of 1999. The increase in the cost of sales and services as
a  percentage  of revenues is  primarily  due to  increased  margin on the fiber
capacity  sale as  compared  to  margin on other  products  and  services  sold.
Partially  offsetting this overall  increase was a decrease in cost of sales and
services as a percentage  of revenues  attributed to growth


                                       29                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

of the  Company's  new product  lines,  changes in product mix, and avoidance of
access  charges and leased lines for data services  traffic  resulting  from the
Company's distribution and termination of its traffic on its own network instead
of paying other carriers to distribute and terminate its traffic.

Selling,   general   and   administrative   expenses.   Selling,   general   and
administrative  expenses  decreased  $800,000  in the third  quarter  of 1999 as
compared to the second  quarter of 1999.  As a  percentage  of  revenues,  third
quarter of 1999  selling,  general  and  administrative  expenses  were 36.3% as
compared  to 30.2%  for the  second  quarter  of 1999.  The third  quarter  1999
increase as a percentage of sales is primarily a result of significant  revenues
derived  from the fiber  capacity  sale  without  a  proportionate  increase  in
selling, general and administrative expenses in the second quarter of 1999.

Net income  (loss).  The Company  reported a net loss of ($3.5)  million for the
third quarter of 1999 as compared to a net income of $2.5 million for the second
quarter of 1999. The decrease in net income is primarily attributed to the fiber
capacity sale in the second quarter of 1999. The decrease is partially offset by
a charge to interest  expense of $470,000  of  deferred  financing  costs in the
second  quarter  of 1999  resulting  from the  amendment  to the  Holdings  Loan
Facilities  which  reduced   borrowing   capacity  (see  Liquidity  and  Capital
Resources).

                         LIQUIDITY AND CAPITAL RESOURCES

The first three quarters of 1999 ("1999") cash flows from  operating  activities
totaled $21.7  million,  net of changes in the  components  of working  capital.
Additional  sources of cash during 1999  included  cash  contributions  from GCI
totaling $20.1 million and long-term  borrowings of $13.8 million.  Expenditures
for property and equipment,  including  construction in progress,  totaled $28.6
million  and  $130.2  million  in 1999  and the  first  three  quarters  of 1998
("1998"),  respectively.  Uses of cash during 1999 also  included  repayment  of
$24.1 million of long-term borrowings and capital lease obligations.

Net  receivables  decreased $1.3 million from December 31, 1998 to September 30,
1999. The decrease is due to:

     - Consolidated group income tax refunds received totaling $2.0 million.
     - A $2.0  million  reclassification  of  consolidated  group  income  taxes
       receivable  to a  long-term  deferred  tax asset  since the  Company  has
       utilized  all net  operating  losses  against  income taxes paid in prior
       periods.  Refundable amounts are now recorded as a long-term deferred tax
       assets and will be realized as future  consolidated  group taxable income
       is generated.
     - An increase in the allowance for doubtful accounts of $2.1 million.

Partially  offsetting the above described  decreases was a $5.2 million increase
in trade receivables  primarily from the  long-distance,  cable and local access
services  product  lines and the  Company's  Internet  SchoolAccess(TM)  service
offering.

Working  capital  totaled  $16.4  million at September  30, 1999, a $7.4 million
increase  from working  capital of $9.0  million as of December  31,  1998.  The
increase in working capital is primarily attributed to:
     - Decreased net receivables as discussed above.
     - Increased  prepaid and other  current  assets of $1.3  million due to the
       timing of certain payments made by the Company.
     - Decreased  accounts payable of $3.9 million due to one large  outstanding
       invoice due at December 31, 1998  related to a product sale  completed in
       1998 and reduced levels of capital  expenditures  and accruals in 1999 as
       compared to 1998.
     - Decreased  accrued interest of $4.7 million due to the timing of interest
       payments.



                                       30                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

The  Holdings  $200,000,000  ($150,000,000  as amended) and  $50,000,000  credit
facilities  mature June 30, 2005. The Holdings Loan  facilities  were amended in
April 1999 (see below) and bear interest, as amended, at either Libor plus 1.00%
to 2.50%,  depending  on the  leverage  ratio of  Holdings  and  certain  of its
subsidiaries, or at the greater of the prime rate or the federal funds effective
rate (as defined) plus 0.05%,  in each case plus an additional  0.00% to 1.375%,
depending  on the leverage  ratio of Holdings  and certain of its  subsidiaries.
$87.7  million  and $106.7  million  were drawn on the credit  facilities  as of
September 30, 1999 and December 31, 1998, respectively.

On April 13, 1999, the Company  amended its Holdings  credit  facilities.  These
amendments contained,  among other things,  provisions for payment of a one-time
amendment  fee  of  0.25%  of  the  aggregate  commitment,  an  increase  in the
commitment fee by 0.125% per annum on the unused portion of the commitment,  and
an increase in the interest  rate of 0.25%.  The amended  facilities  reduce the
aggregate  commitment  by  $50  million  to  $200  million,  and  limit  capital
expenditures  to $35  million  in 1999 and $35  million  in 2000  with no limits
thereafter  (excluding  amounts to be paid for purchased  satellite  transponder
facilities).  The amended  facilities  contemplated  that  Holdings  receive $20
million in proceeds  from a GCI  preferred  stock  issuance by May 31, 1999 (see
below).  Pursuant to the Financial  Accounting  Standards  Board Emerging Issues
Task Force Issue 98-14,  "Debtor's  Accounting for Changes in  Line-of-Credit or
Revolving  Debt  Arrangements,"  the  Company  recorded as  additional  interest
expense  $470,000  of  deferred  financing  costs in the second  quarter of 1999
resulting from the reduced borrowing capacity.

Holding's credit facilities and GCI, Inc.'s senior notes contain restrictions on
the operations and activities of the Company,  including  requirements  that the
Company comply with certain financial covenants and financial ratios.  Under the
amended  Holding's credit facility,  Holdings may not permit the ratio of senior
debt to annualized  operating  cash flow (as defined) of Holdings and certain of
its  subsidiaries to exceed 3.0 to 1.0 through  December 31, 1999, total debt to
annualized  operating  cash flow to exceed 6.25 to 1.00 through  March 31, 2000,
and annualized  operating  cash flow to interest  expense to be less than 1.5 to
1.0  through  September  30,  1999  (1.75 to 1.0 from  October  1, 1999  through
December  31,  1999).  Each  of the  foregoing  ratios  decreases  in  specified
increments during the life of the credit facility.  The credit facility requires
Holdings to maintain a ratio of annualized  operating  cash flow to debt service
of  Holdings  and  certain  of its  subsidiaries  of at least  1.25 to 1.0,  and
annualized  operating  cash flow to fixed  charges of at least 1.0 to 1.0 (which
adjusts to 1.05 to 1.0 in April, 2003 and thereafter). The senior notes impose a
requirement that the leverage ratio of GCI, Inc. and certain of its subsidiaries
not  exceed 7.5 to 1.0 prior to  December  31,  1999 and 6.0 to 1.0  thereafter,
subject to the ability of GCI,  Inc.  and certain of its  subsidiaries  to incur
specified permitted indebtedness without regard to such ratios.

On January 27, 1998 Alaska United closed a $75 million project finance  facility
("Fiber Facility") to construct a fiber optic cable system connecting Anchorage,
Fairbanks,  Valdez,  Whittier,  Juneau and Seattle.  $71.7  million was borrowed
under the facility at September 30, 1999.  The Fiber  Facility is a 10-year term
loan that is interest  only for the first 5 years.  The facility can be extended
an additional two years at any time between the second and fifth  anniversary of
closing the  facility if the Company can  demonstrate  projected  revenues  from
certain  capacity  commitments  will be sufficient  to pay all operating  costs,
interest,  and principal  installments based on the extended maturity. The Fiber
Facility bears interest at either Libor plus 3.0%, or at the lender's prime rate
plus 1.75%. The interest rate will decline to Libor plus 2.5%-2.75%,  or, at the
Company's  option,  the lender's  prime rate plus  1.25%-1.5%  after the project
completion date and when the loan balance is $60,000,000 or less.

The  Fiber  Facility  contains,   among  others,   covenants  requiring  certain
intercompany  loans and  advances in order to maintain  specific  levels of cash
flow necessary to pay operating costs, interest and principal installments.  All
of Alaska United's  assets,  as well as a pledge of the  partnership  interests'
owning Alaska


                                       31                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

United, collateralize the Fiber Facility. Construction of the fiber facility was
completed  and the  facility  was placed into  service on February 4, 1999.  The
project was completed on budget.

The Company will use approximately one-half of the Alaska United system capacity
in  addition  to its  existing  owned  and  leased  facilities  to carry its own
traffic.  One of the Company's large commercial  customers signed  agreements in
February and March 1999 for the immediate  lease of three DS3 circuits on Alaska
United facilities within Alaska, and between Alaska and the lower 48 states. The
lease  agreements  provide  for  three-year  terms,  with  renewal  options  for
additional  terms.  The  Company  continues  to  pursue  opportunities  to lease
additional capacity on its system.

The Company  completed a sale of capacity in the Alaska  United system to Alaska
Communications  Systems in a $19.5 million cash  transaction.  The sale includes
both capacity  within  Alaska,  and between  Alaska and the lower 48 states.  An
agreement  was executed in August 1999 for a second $19.5  million sale of fiber
capacity  to Alaska  Communications  Systems.  The Company  continues  to pursue
opportunities for sale of additional capacity on its system.

The Company's expenditures for property and equipment, including construction in
progress,  totaled  $28.6  million  and  $130.2  million  during  1999 and 1998,
respectively.  The Company anticipates that its capital expenditures in 1999 may
total as much as $35 million.  Planned capital  expenditures  over the next five
years  include  those  necessary  for  continued   expansion  of  the  Company's
long-distance,  local  exchange and Internet  facilities,  the  development  and
construction of a PCS network,  and continued  upgrades to its cable  television
plant, and approximately  $43.5 million for satellite  transponders.  Sources of
funds for these planned capital  expenditures are expected to include internally
generated cash flows and borrowings under the Company's credit facilities.

The Company's ability to invest in discretionary capital and other projects will
depend  upon its future  cash flows and  access to  borrowings  under its credit
facilities.  Management  anticipates that cash flow generated by the Company and
borrowings  under its  credit  facilities  will be  sufficient  to fund  capital
expenditures  and  its  working  capital  requirements.  Should  cash  flows  be
insufficient  to  support  additional  borrowings,  such  investment  in capital
expenditures will likely be reduced.

The Company  entered  into a purchase  and  lease-purchase  option  agreement in
August 1995 for the acquisition of satellite  transponders to meet its long-term
satellite  capacity  requirements.  The launch of the  satellite  in August 1998
failed.  The  Company  did not  assume  launch  risk  and the  launch  has  been
rescheduled  for the first  quarter of 2000.  The Company will continue to lease
transponder  capacity until the delivery of the  transponders on the replacement
satellite. The balance payable upon expected delivery of the transponders during
the second quarter of 2000, in addition to the $9.1 million  deposit  previously
paid, totals approximately $43.5 million.

GCI issued 20,000 shares of convertible  redeemable  accreting  preferred  stock
("Preferred  Stock") on April 30, 1999.  Proceeds  totaling $20 million  (before
payment of costs and expenses)  were  contributed to GCI, Inc. and were used for
general corporate purposes,  to repay outstanding  indebtedness,  and to provide
additional liquidity.

The  long-distance,   local  access,   cable,  Internet  and  wireless  services
industries  are  experiencing  increasing  competition  and rapid  technological
changes.  The Company's  future  results of  operations  will be affected by its
ability to react to changes in the competitive environment and by its ability to
fund and  implement  new  technologies.  The Company is unable to determine  how
competition,  technological changes and its net operating losses will affect its
ability to obtain financing.



                                       32                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

The Company  believes  that it will be able to meet its  current  and  long-term
liquidity and capital  requirements,  including fixed charges,  through its cash
flows from operating  activities,  existing cash, cash  equivalents,  short-term
investments, credit facilities, and other external financing and equity sources.

                          NEW ACCOUNTING PRONOUNCEMENTS

SFAS No. 133 and SFAS No.  137. In June 1998,  the  Accounting  Standards  Board
issued  SFAS  No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities,"  effective for years  beginning  after June 15, 1999.  SFAS No. 133
establishes  accounting and reporting  standards requiring that every derivative
instrument,   including  certain  derivative   instruments   imbedded  in  other
contracts,  be  recorded in the  balance  sheet as either an asset or  liability
measured  at  its  fair  value.  SFAS  No.  133  requires  that  changes  in the
derivative's  fair value be  recognized  currently in earnings  unless  specific
hedge  criteria  are met.  Special  accounting  for  qualifying  hedges  allow a
derivative's gains or losses to offset related results on the hedged item in the
income statement and requires that a company must formally  document,  designate
and assess the effectiveness of transactions  that receive hedge accounting.  In
August 1999, the Accounting Standards Board issued SFAS No. 137, "Accounting for
Derivative  Instruments and Hedging  Activities - Deferral of the Effective Date
of FASB Statement No. 133." SFAS No. 137 extends the implementation date of SFAS
No. 133 and gives additional  guidance  regarding the recognition in the balance
sheet of an embedded derivative. Management of the Company expects that adoption
of SFAS No.  133 and  SFAS No.  137  will  not  have a  material  impact  on the
Company's interim and year-end 2001 financial statements.

                                 YEAR 2000 COSTS

Many financial  information and operational systems in use today may not be able
to interpret  dates after  December 31, 1999 because such systems allow only two
digits to indicate the year in a date.  As a result,  such systems are unable to
distinguish  January  1, 2000 from  January 1, 1900,  which  could have  adverse
consequences  on the  operations of an entity and the  integrity of  information
processing.  This could result in a system  failure or  miscalculations  causing
disruptions  of  operations,  including,  among other  things,  a shut down in a
company's  operations,  a  temporary  inability  to process  transactions,  send
invoices or engage in similar normal business activities. This potential problem
is referred to as the "Year 2000" or "Y2K" issue.

State of readiness.  The Company has undertaken various  initiatives to evaluate
the Year  2000  readiness  of the  products  and  services  sold by the  Company
("Products"),   the  information   technology  systems  used  in  the  Company's
operations ("IT Systems"),  its non-IT systems, such as power to its facilities,
HVAC systems,  building security,  voice mail and other systems,  as well as the
readiness of its customers and suppliers.  The Company has identified eight Year
2000 target areas that cover the entire scope of the Company's  business and has
internally  established  teams which completed an 8-step  Compliance  Validation
Process  ("CVP")  for each  target  area with  respect to  critical  and service
delivery systems.  The table below identifies the Company's target areas as well
as the 8-step CVP with its expected timeline. Team activity is currently focused
towards the process of completing Phase 2.



                                       33                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
        ----------------------------------------------------------------------------------------------------------------
                    Year 2000 Target Areas                               Compliance Validation Process
        ----------------------------------------------------------------------------------------------------------------
        <S>                                             <C>                             <C>
        1.   Business Computer Systems                              PHASE 1
        2.   Technical Infrastructure                   1. Team Formation               Completed 1st quarter 1997
        3.   End-User Computing                         2. Inventory Assessment         Completed 4th quarter 1998
        4.   Switching and Head-end Equipment           3. Compliance Assessment        Completed 4th quarter 1998
        5.   Logistics                                  4. Risk Assessment              Completed 4th quarter 1998
        6.   Facilities                                 ----------------------------------------------------------------
        7.   Customers                                              PHASE 2
        8.   Suppliers/Key Service Providers            5. Resolution/Remediation       Completed 2nd quarter 1999
                                                        6. Validation                   Completed 3rd quarter 1999
                                                        7. Contingency Plan             Completed 3rd quarter 1999
                                                        8. Sign-Off Acceptance          Expected completion 4th
                                                                                        quarter 1999
        ----------------------------------------------------------------------------------------------------------------
</TABLE>
In 1997,  the  Company  established  a  corporate-wide  Year 2000 task  force to
address  Y2K issues.  This effort is  comprehensive  and  encompasses  software,
hardware,  electronic data interchange,  networks,  PC's,  facilities,  embedded
chips,  century  certification,  supplier  and customer  readiness,  contingency
planning,  and domestic and  international  operations.  The Company has tested,
replaced or upgraded all of its critical business  applications and systems. The
Company has  prioritized its third-party  relationships  as critical,  severe or
sustainable, has completed the assessment phase for third parties, has requested
a Y2K contract warranty in many new key contracts and is developing  contingency
plans for critical third parties,  including key customers,  suppliers and other
service providers. An assessment of its key customers showed that no significant
impact to the Company is  expected  due to customer  Y2K  problems.  The Company
continues  to evaluate  other  telecommunication  companies  that  purchase  the
Company's services.

With respect to the  Company's  relationships  with third  parties,  the Company
relies both domestically and internationally upon various vendors,  governmental
agencies,  utility companies,  telecommunications  service  companies,  delivery
service companies and other service providers.  Although these service providers
are outside the Company's control,  the Company has contacted those with whom it
believes its relationships are material and has verbally  communicated with some
of its strategic customers to determine the extent to which interfaces with such
entities are  vulnerable  to Year 2000 issues and whether  products and services
purchased from or by such entities are Year 2000 ready.

Over 400 companies have been contacted  directly by mail, by telephone,  through
on-site  visits or through  inquiry of their Y2K Internet web sites to determine
their state of readiness.  Responses vary from  confirmation  that the supply of
products or services provided to the Company will continue without  interruption
or delay  through  the year 2000,  to  providing  their  plans for making  their
products or service  delivery  systems Y2K  compliant.  The Company is currently
evaluating the  sufficiency of the responses  received from these third parties.
The Company intends to complete follow-up activities,  including but not limited
to site  surveys,  phone  surveys and  mailings,  with  significant  vendors and
service providers as part of the Phase 2 sign-off acceptance.

Costs to address year 2000 issues.  Costs  related to the Y2K issue are expensed
as incurred and are funded  through the Company's  operating  cash flows and its
credit  agreements.  Through  September  30,  1999,  the  Company  has  expensed
incremental  remediation costs totaling $2.0 million, with remaining incremental
remediation  costs  in  1999  and  2000  estimated  at  approximately  $750,000.
Management  must  balance the  requirements  for funding  discretionary  capital
expenditures  with required year 2000 efforts given its limited  resources.  The
Company has not deferred any critical information technology projects because of
its Year


                                       34                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

2000 program efforts,  which are being addressed  primarily  through a dedicated
team within the Company's information technology group.

Time and cost estimates are based on currently  available  information and could
be affected by the ability to correct all relevant computer codes and equipment,
and the Y2K readiness of the Company's business  partners,  among other factors.
At this time, the Company does not possess information necessary to estimate the
potential  financial  impact  of Year 2000  compliance  issues  relating  to its
vendors, customers and other third parties.

Risk of year 2000 issues.  If necessary  modifications  and  conversions  by the
Company  are not made on a timely  basis,  or if key third  parties  are not Y2K
ready,  Y2K  problems  could have a  material  adverse  effect on the  Company's
financial condition,  results of operations and liquidity.  However, the Company
believes it has identified and addressed all aspects of its operations  that may
be  affected  by the  Year  2000  issue  and has  addressed  the  most  critical
applications first.

Although the Company  considers  them  unlikely,  the Company  believes that the
following several situations, not in any particular order, make up the Company's
worst-case Year 2000 scenarios:

     - Disruption of Electrical Power Supplies  Resulting from Extended Regional
       Power Failure(s).  The Company's major switching and information  systems
       are protected by emergency standby electrical  generators in the event of
       short-term power outages.  If electrical  supplies from regional electric
       utilities are disrupted  for longer  periods of time,  the Company may be
       required to power-down  its electronic  switching,  head-end and computer
       equipment.  The Company is closely monitoring  electrical  utilities that
       provide  service to the Company for their Year 2000  readiness.  Based on
       their  progress  reports  and  completion  of  assessments,  the  Company
       believes that there will be no  significant  impact on its  operations in
       the major  communities  served  by the  Company.  Many of the  electrical
       companies  serving  smaller rural  communities  employ  equipment that is
       manual or controlled by non  date-effecting  equipment,  however they may
       experience outages if they do not receive fuel from their suppliers.
     - Disruption of a Significant  Customer's Ability to Accept Products or Pay
       Invoices.  The Company's significant  customers are large,  well-informed
       customers,  mostly in the  telecommunications and oil and gas industries,
       who are  disclosing  information to their vendors that indicates they are
       well along the path toward Year 2000  compliance.  These  customers  have
       demonstrated   their   awareness  of  the  Year  2000  issue  by  issuing
       requirements   of  their   suppliers   and   indicating   the  stages  of
       identification   and  remediation   which  they  consider   adequate  for
       progressive  calendar  quarters  leading  up to  the  century  mark.  The
       Company's significant customers, moreover, are substantial companies that
       the Company believes would be able to make adjustments in their processes
       as required to cause timely payment of invoices.
     - Disruption of Supplies and Materials.  In early 1998 the Company began an
       ongoing  process of surveying  its vendors with regard to their Year 2000
       readiness  and is now in the  process of  finalizing  its  assessment  of
       responses  to the survey.  The Company  expects to work with vendors that
       show a need for assistance or that provide inadequate  responses,  and in
       many cases expects that survey results will be refined  significantly  by
       such work.  Where ultimate survey results show that the need arises,  the
       Company  will arrange for back-up  vendors  before the  changeover  date.
       Supplies and materials  necessary for invoicing and other  functions have
       been  ordered and will be on hand in bulk prior to  December  31, 1999 to
       provide  an  adequate  inventory  to bridge up to three  months of vendor
       supply chain disruptions.
     - Disruption of the Company's  Administrative  and Billing IT Systems.  The
       Company  has  completed  an upgrade  of its  current  financial  software
       systems to  state-of-the-art  systems and such process has required  Year
       2000  compliance  in the various  invitations  for  proposals.  Year 2000
       testing is  occurring  as upgrades  proceed.  The  Company's  billing and
       information  systems have been assessed and


                                       35                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

       remediation  is  substantially  complete.   System  processes  have  been
       prioritized  so that critical  date-sensitive  systems and  functionality
       were  remediated  first.   Non-critical  systems  and  functionality  are
       remediated   following  critical  systems.   The  Company's  efforts  are
       proceeding  on-target and on budget.  Accordingly,  the Company  believes
       that, after assessment and remediation, if any disruptions do occur, such
       will be dealt with  promptly  and will be no more severe with  respect to
       correction or impact than would be an unexpected  billing or  information
       system error.
     - Disruption  of the Company's  Non-IT  Systems.  The Company  continues to
       conduct a comprehensive assessment of all non-IT systems, including among
       other things its  switching  and head-end  systems and  operations,  with
       respect to both embedded  processors and obvious  computer  control.  The
       Company has completed its assessment  activities and is in the process of
       completing  remediation  efforts.  The Company  believes that, after such
       assessment and  remediation,  if any  disruptions do occur,  such will be
       dealt with promptly and will be no more severe with respect to correction
       or  impact  than  would be an  unexpected  breakdown  of  well-maintained
       equipment.
     - De-Listing  of Company as a Vendor to Certain  Customers.  Several of the
       Company's  principal  customers have required updated reports in the form
       of answers to extensive  multiple-choice  surveys on the  Company's  Year
       2000 compliance efforts.  According to these customers,  failure to reply
       to the  readiness  survey  would  have  led to  de-listing  as a  service
       supplier at the present time,  resulting in possible  disqualification to
       bid on procurements requiring service delivery in the future. The Company
       has  responded to these  reports on a timely  basis.  The Company has not
       been  disqualified  as a supplier to any customers.  Several  significant
       customers have scheduled monitoring meetings during 1999.

Contingency plans. The Company has completed development of specific contingency
plans for potential Year 2000 disruptions.  The aforementioned 8-step Compliance
Validation Process includes contingency planning by each team and such plans are
being carefully reviewed and tested by the Company.

                                 ALASKA ECONOMY

The Company offers  telecommunication  and video services to customers primarily
throughout Alaska. As a result of this geographic  concentration,  the Company's
growth and operations depend upon economic  conditions in Alaska. The economy of
Alaska is dependent upon the natural resource industries,  and in particular oil
production,  as  well as  tourism,  fisheries,  government,  and  United  States
military  spending.  Any  deterioration  in these  markets could have an adverse
impact on the Company. Oil revenues over the past several years have contributed
in excess of 75% of the revenues from all segments of the Alaska economy and are
expected to account for 73% in 1999.

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 1988. Over the
past several years,  it has begun to decline.  Market prices for North Slope oil
declined to below $9 per barrel in 1998, well below the average price per barrel
used by the State of Alaska to budget its oil related revenues.

Oil companies and service  providers have  implemented  cost cutting measures to
offset a portion of the  declining  revenues.  Oil company and related oil field
service  company  layoffs  reportedly will result in a reduction of oil industry
jobs by at least 39 percent by the end of 1999. Reduced oil revenues will impact
the state of Alaska's  economy,  and is expected to particularly  hurt state and
local  government  and oil service  companies.  Oil field  service and  drilling
contractors  are  expected  to cut  operating  costs to  adjust  for  decreasing
production and exploration.

Oil prices have increased to over $22 per barrel in November 1999,  reducing the
amount  of funds  needed  to  balance  the  state of  Alaska's  expected  budget
shortfall  from an  estimated  $1 billion to $500  million.  The State of Alaska
maintains budget reserve accounts that are intended to fund budgetary shortfalls
and may


                                       36                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

fund a portion of the revenue shortfall. The Governor of the state of Alaska and
the state  legislature  have  implemented  cost  cutting and  revenue  enhancing
measures to reduce the amount of budget  reserve funds that will be necessary to
balance the state budget.

The Alaska  Department of Revenue  predicts that oil production and revenue will
stabilize for a period of time as new oil fields  currently  being developed are
placed into production.  State revenue forecasts, based on increased average oil
prices and  stabilizing  production  levels,  indicate  that the state's  budget
reserve account could last three years longer than previous estimated, to 2005.

BP Amoco  announced  in April  1999 its  intention  to  purchase  ARCO for $26.8
billion.  BP Amoco and ARCO together  reportedly own approximately 70 percent of
the Alaska North Slope oil fields and the company that operates the Trans-Alaska
Pipeline System.  Concerns have been expressed about the impact of this specific
transaction and oil company consolidation in general on the oil and gas industry
in  Alaska,  and in turn on the  economy  of Alaska.  Concerns  include  reduced
competition  in an industry that is the largest  source of revenues to the state
of Alaska,  and foreign  ownership of a significant  amount of United States oil
production facilities and reserves. North Slope oil feeds most of the refineries
on the West Coast,  which are set up to process that particular  grade of crude.
Regulators are concerned that the new company could charge higher prices because
of its control of much of the supply.  Realignment  of operations  following the
acquisition reportedly will result in eliminating up to 400 positions in Alaska.

The State of Alaska and BP Amoco reached an agreement in November 1999 to:

     - sell interests in North Slope properties of not less than 175,000 barrels
       of working interest oil per day, primarily in the Kuparuk field, together
       with  associated   infrastructure  and  a  proportionate  amount  of  the
       Trans-Alaska Pipeline System;
     - transfer  operatorships  of the Kuparuk and Alpine fields;  and
     - sell or  relinquish  620,000  acres of  state  and  federal  explorations
       leases.

In  addition,  BP Amoco  agreed to  purchase  oil from small  producers  using a
pre-arranged  price formula,  and to sell some of its tankers.  Other provisions
would benefit the state of Alaska specifically, including a pledge to donate 0.2
percent of  production  to Alaska  entities,  with 30 percent of that  figure --
currently about $6 million a year -- going to the state  university  system.  BP
Amoco also pledged to hire qualified  Alaskans when they are available for jobs,
encourage  contractors to do the same, and to fabricate production facilities in
the state of Alaska where feasible.




                                       37                            (Continued)
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                                   (Unaudited)

The  terms  of  the  agreement   reportedly   will  allow  BP  Amoco  to  retain
approximately  three  quarters of the value of ARCO's Alaskan  assets.  BP Amoco
would retain control of the Prudhoe Bay field. Currently, only BP Amoco and ARCO
serve as operators of North Slope fields.  The asset sales reportedly would have
minimal  impact  on the $1  billion  of  savings  worldwide  that BP  Amoco  has
projected would result from the merger.

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 the reduced  level of  royalties.  The
Company is not able to predict the effect of changes in the price and production
volumes of North  Slope oil or the  acquisition  of ARCO by BP Amoco on Alaska's
economy or on the Company.

                                   SEASONALITY

Long-distance  revenues have historically been highest in the summer months as a
result 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, on the other hand, are higher in the
winter months because  consumers tend to watch more  television,  and spend more
time at home, during these months.  The Company's local access services revenues
are not expected to exhibit  significant  seasonality.  The  Company's  Internet
access services are expected to reflect  seasonality trends similar to the cable
television segment. The Company's ability to implement  construction projects is
reduced  during the winter months because of cold  temperatures,  snow and short
daylight hours.

                                    INFLATION

The Company  does not believe that  inflation  has a  significant  effect on its
operations.




                                       38
<PAGE>
PART I.
ITEM 3.  QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK

The Company's Senior Holdings Loan carries interest rate risk.  Amounts borrowed
under this Agreement bear interest at Libor plus 1.0% to 2.5%,  depending on the
leverage ratio of Holdings and certain of its subsidiaries, or at the greater of
the prime rate or the federal funds  effective rate (as defined) plus 0.05%,  in
each case plus an additional 0.0% to 1.375%,  depending on the leverage ratio of
Holdings and certain of its  subsidiaries.  Should the Libor rate,  the lenders'
base rate or the leverage  ratios change,  the Company's  interest  expense will
increase or decrease  accordingly.  As of September  30,  1999,  the Company had
borrowed  $87.7  million  subject to interest  rate risk.  On this amount,  a 1%
increase  in the  interest  rate would cost the Company  $877,000 in  additional
gross interest cost on an annualized basis.

The Company's Fiber Facility carries interest rate risk.  Amounts borrowed under
this Agreement bear interest at Libor plus 3.0%, or at the Company's choice, the
lender's  prime rate plus 1.75%.  The  interest  rate will decline to Libor plus
2.5%-2.75%,  or at the Company's choice, the lender's prime rate plus 1.25%-1.5%
after the project  completion  date and when the loan balance is  $60,000,000 or
less.  Should the Libor rate,  the  lenders'  base rate or the  leverage  ratios
change, the Company's interest expense will increase or decrease accordingly. As
of  September  30,  1999,  the Company had  borrowed  $71.7  million  subject to
interest  rate risk.  On this amount,  a 1% increase in the interest  rate would
cost the Company  $717,000 in  additional  gross  interest cost on an annualized
basis.

PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Information  regarding pending legal proceedings to which the Company is a party
is  included  in Note 7 of Notes to  Interim  Condensed  Consolidated  Financial
Statements and is incorporated herein by reference.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

                (a) Exhibit 27 - Financial Data Schedule  *

                (b) Reports on Form 8-K filed during the quarter ended September
                    30, 1999 - None

           ---------------------
           * Filed herewith.



                                       39
<PAGE>
<TABLE>
                                   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.

<CAPTION>
              Signature                                         Title                                Date
--------------------------------------      --------------------------------------------      ------------------
<S>                                         <C>                                                <C>

/s/                                         President and Director                             November 12, 1999
--------------------------------------      (Principal Executive Officer)                     ------------------
Ronald A. Duncan

/s/                                         Vice President and Director                        November 12, 1999
--------------------------------------                                                        ------------------
G. Wilson Hughes

/s/                                         Secretary, Treasurer and Director                  November 12, 1999
--------------------------------------      (Principal Financial and Accounting Officer)      ------------------
John M. Lowber
</TABLE>


                                       40