As filed with the Securities and Exchange Commission on November 14, 2003

                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, 2003

                                       OR

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

         For the transition period from          to

                           Commission File No. 0-5890

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


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

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

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

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

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

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


        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, 2003

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

PART I.  FINANCIAL INFORMATION

         Item l.    Consolidated Balance Sheets as of September 30, 2003
                       (unaudited) and December 31, 2002..................................................5

                    Consolidated Statements of Operations for the
                       three and nine months ended September 30, 2003
                       (unaudited) and 2002 (unaudited)...................................................7

                    Consolidated Statements of Stockholder's Equity
                       for the nine months ended September 30, 2003
                       (unaudited) and 2002 (unaudited)...................................................8

                    Consolidated Statements of Cash Flows for the nine
                       months ended September 30, 2003 (unaudited)
                       and 2002 (unaudited)...............................................................9

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

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

         Item 3.    Quantitative and Qualitative Disclosures About
                    Market Risk...........................................................................56

         Item 4.    Controls and Procedures...............................................................57

PART II.  OTHER INFORMATION

         Item 1.    Legal Proceedings.....................................................................57

         Item 6.    Exhibits and Reports on Form 8-K......................................................58

         Other items are omitted, as they are not applicable.

SIGNATURES................................................................................................59
</TABLE>

                                       2
<PAGE>
            Cautionary Statement Regarding Forward-Looking Statements


You should carefully review the information contained in this Quarterly Report,
but should particularly consider any risk factors that we set forth in this
Quarterly Report and in other reports or documents that we file from time to
time with the Securities and Exchange Commission ("SEC"). In this Quarterly
Report, in addition to historical information, we state our future strategies,
plans, objectives or goals and our beliefs of future events and of our future
operating results, financial position and cash flows. In some cases, you can
identify those so-called "forward-looking statements" by words such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "project," or "continue" or the negative of those words
and other comparable words. All forward-looking statements involve known and
unknown risks, uncertainties and other important factors that may cause our
actual results, performance, achievements, plans and objectives to differ
materially from any future results, performance, achievements, plans and
objectives expressed or implied by these forward-looking statements. In
evaluating those statements, you should specifically consider various factors,
including those outlined below. Those factors may cause our actual results to
differ materially from any of our forward-looking statements. For these
statements, we claim the protection of the safe harbor for forward-looking
statements provided by the Securities Reform Act. Such risks, uncertainties and
other factors include but are not limited to those identified below and those
further described in Part I, Item 1. Factors That May Affect Our Business and
Future Results of our December 31, 2002 Form 10-K.

     o   Material adverse changes in the economic conditions in the markets we
         serve and in general economic conditions, including the continuing
         impact of the current depressed telecommunications industry due to high
         levels of competition in the long-distance market resulting in
         pressures to reduce prices, an oversupply of long-haul capacity,
         excessive debt loads; several high-profile company failures and
         potentially fraudulent accounting practices by some companies;
     o   The efficacy of laws enacted by Congress and the state of Alaska
         legislature; rules and regulations to be adopted by the Federal
         Communications Commission ("FCC") and state public regulatory agencies
         to implement the provisions of the 1996 Telecom Act; the outcome of
         litigation relative thereto; and the impact of regulatory changes
         relating to access reform;
     o   Our responses to competitive products, services and pricing, including
         pricing pressures, technological developments, alternative routing
         developments, and the ability to offer combined service packages that
         include long-distance, local, cable and Internet services;
     o   The extent and pace at which different competitive environments develop
         for each segment of our business;
     o   The extent and duration for which competitors from each segment of the
         telecommunication industries are able to offer combined or full service
         packages prior to our being able to do so;
     o   The degree to which we experience material competitive impacts to our
         traditional service offerings prior to achieving adequate local service
         entry;
     o   Competitor responses to our products and services and overall market
         acceptance of such products and services;
     o   The outcome of our negotiations with Incumbent Local Exchange Carriers
         ("ILECs") and state regulatory arbitrations and approvals with respect
         to interconnection agreements;
     o   Our ability to purchase network elements or wholesale services from
         ILECs at a price sufficient to permit the profitable offering of local
         telephone service at competitive rates;
     o   Success and market acceptance for new initiatives, many of which are
         untested;
     o   The level and timing of the growth and profitability of existing and
         new initiatives, particularly yellow page directories, local telephone
         services expansion including deploying digital local telephone service,
         Internet services expansion and wireless services;
     o   Start-up costs associated with entering new markets, including
         advertising and promotional efforts;


                                       3
<PAGE>
     o   Risks relating to the operations of new systems and technologies and
         applications to support new initiatives;
     o   Local conditions and obstacles;
     o   The impact on our industry and indirectly on us of oversupply of
         capacity resulting from excessive deployment of network capacity in
         certain markets we do not serve;
     o   Uncertainties inherent in new business strategies, new product launches
         and development plans, including local telephone services, Internet
         services, wireless services, digital video services, cable modem
         services, digital subscriber line services, transmission services, and
         yellow page directories, and the offering of these services in
         geographic areas with which we are unfamiliar;
     o   The risks associated with technological requirements, technology
         substitution and changes and other technological developments;
     o   Prolonged service interruptions which could affect our business;
     o   Development and financing of telecommunication, local telephone,
         wireless, Internet and cable networks and services;
     o   Future financial performance, including the availability, terms and
         deployment of capital; the impact of regulatory and competitive
         developments on capital outlays, and the ability to achieve cost
         savings and realize productivity improvements and the consequences of
         increased leverage;
     o   Availability of qualified personnel;
     o   Changes in, or failure, or inability, to comply with, government
         regulations, including, without limitation, regulations of the FCC, the
         Regulatory Commission of Alaska ("RCA"), and adverse outcomes from
         regulatory proceedings;
     o   Changes in regulations governing unbundled network elements ("UNE");
     o   Uncertainties in federal military spending levels and military base
         closures in markets in which we operate;
     o   The ongoing global and domestic trend towards consolidation in the
         telecommunications industry, which may make the competitors larger and
         better financed and afford these competitors with extensive resources
         and greater geographic reach, allowing them to compete more
         effectively;
     o   The financial, credit and economic impacts of the MCI (previously
         "WorldCom, Inc.") bankruptcy filing on the industry in general and on
         us in particular;
     o   A significant delay in MCI's emergence from bankruptcy or a migration
         of MCI's traffic off our network without it being replaced by other
         common carriers that interconnect with our network;
     o   The effect on us of pricing pressures, new program offerings and market
         consolidation in the markets served by our major customers, MCI and
         Sprint;
     o   The effect on us of industry consolidation and the acquisition of one
         or more of our large wholesale customers;
     o   Under Statement of Financial Accounting Standard ("SFAS") 142, we must
         test our intangibles for impairment at least annually, which may result
         in a material, non-cash write-down of goodwill and could have a
         material adverse impact on our results of operations and shareholders'
         equity; and
     o   Other risks detailed from time to time in our periodic reports filed
         with the SEC.


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


                                       4
<PAGE>
PART I.  FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
                                     GCI, INC. AND SUBSIDIARIES
                                     CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Amounts in thousands)                                                            (Unaudited)
                                                                                 September 30,    December 31,
                            ASSETS                                                   2003             2002
---------------------------------------------------------------------------    ---------------- ---------------
<S>                                                                           <C>                   <C>
Current assets:
    Cash and cash equivalents                                                 $     10,780           11,940
                                                                               --------------- ----------------
    Receivables:
        Trade                                                                       60,107           63,111
        Employee                                                                       292              391
        Other                                                                        2,602            3,093
                                                                               --------------- ----------------
                                                                                    63,001           66,595
        Less allowance for doubtful receivables                                      2,359           14,010
                                                                               --------------- ----------------
           Net receivables                                                          60,642           52,585
                                                                               --------------- ----------------

    Prepaid and other current assets                                                11,605            9,171
    Deferred income taxes, net                                                       8,644            8,509
    Notes receivable with related parties                                            1,053              697
    Property held for sale                                                           1,037            1,037
    Inventories                                                                        537              400
                                                                               --------------- ----------------
           Total current assets                                                     94,298           84,339
                                                                               --------------- ----------------

Property and equipment in service, net of depreciation                             371,564          381,394
Construction in progress                                                            22,981           16,958
                                                                               --------------- ----------------
           Net property and equipment                                              394,545          398,352
                                                                               --------------- ----------------

Cable certificates, net of amortization of $26,775 and $26,884 at
   September 30, 2003 and December 31, 2002, respectively                          191,241          191,132
Goodwill, net of amortization of $7,200 at September 30, 2003 and December
   31, 2002                                                                         41,972           41,972
Other intangible assets, net of amortization of $1,522 and $1,848 at
   September 30, 2003 and December 31, 2002, respectively                            3,304            3,460
Deferred loan and senior notes costs, net of amortization of $6,630 and
   $4,110 at September 30, 2003 and December 31, 2002, respectively                 10,237            9,961
Notes receivable with related parties                                                5,246            5,142
Other assets, at cost, net of amortization of $52 and $24 at September 30,
   2003 and December 31, 2002, respectively                                          8,229            4,424
                                                                               --------------- ----------------
           Total other assets                                                      260,229          256,091
                                                                               --------------- ----------------
           Total assets                                                       $    749,072          738,782
                                                                               =============== ================

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

                                               5                     (Continued)
<PAGE>
<TABLE>
                                     GCI, INC. AND SUBSIDIARIES
                                     CONSOLIDATED BALANCE SHEETS
                                            (Continued)
<CAPTION>
(Amounts in thousands)                                                           (Unaudited)
                                                                                 September 30,    December 31,
             LIABILITIES AND STOCKHOLDER'S EQUITY                                    2003             2002
--------------------------------------------------------------------------    ---------------- ----------------
<S>                                                                          <C>                    <C>
Current liabilities:
  Current maturities of obligations under long-term debt and capital
    leases                                                                   $      24,017            1,857
  Accounts payable                                                                  28,865           33,605
  Deferred revenue                                                                  20,501           18,290
  Accrued payroll and payroll related obligations                                   15,566           11,821
  Accrued liabilities                                                                6,003            5,522
  Due to related party                                                               5,465            4,871
  Accrued interest                                                                   2,961            7,938
  Subscriber deposits                                                                  691              889
                                                                              ---------------- ----------------
        Total current liabilities                                                  104,069           84,793

Long-term debt, excluding current maturities                                       330,000          357,700
Obligations under capital leases, excluding current maturities                      40,529           44,072
Obligations under capital leases due to related party, excluding
  current maturities                                                                   685              703
Deferred income taxes, net of deferred income tax benefit                           25,380           16,061
Other liabilities                                                                    6,092            4,956
                                                                              ---------------- ----------------
        Total liabilities                                                          506,755          508,285
                                                                              ---------------- ----------------

Stockholder's equity:
  Class A common stock.  Authorized 10 shares; issued 0.01 shares at
    September 30, 2003 and December 31, 2002                                       206,622          206,622
  Paid-in capital                                                                   44,716           44,904
  Retained deficit                                                                  (8,599)         (20,489)
  Accumulated other comprehensive loss                                                (422)            (540)
                                                                              ---------------- ----------------
        Total stockholder's equity                                                 242,317          230,497
  Commitments and contingencies
                                                                              ---------------- ----------------
        Total liabilities and stockholder's equity                           $     749,072          738,782
                                                                              ================ ================
See accompanying notes to interim condensed consolidated financial statements.
</TABLE>

                                       6
<PAGE>
<TABLE>
                                            GCI, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (Unaudited)
<CAPTION>
                                                           Three Months Ended                 Nine Months Ended
                                                              September 30,                      September 30,
                                                           2003           2002               2003            2002
                                                     -------------- --------------     --------------- --------------
                                     (Amounts in thousands, except per share amounts)
<S>                                                  <C>                 <C>               <C>             <C>

Revenues                                            $     98,327         94,550            287,043         275,500

Cost of sales and services                                31,870         30,375             92,189          92,473
Selling, general and administrative expenses              35,262         32,209            102,549          96,095
Bad debt expense                                             533          1,677              1,932          12,874
Depreciation, amortization and accretion expense          13,067         13,936             39,368          41,806
                                                     -------------- --------------     --------------- --------------
     Operating income                                     17,595         16,353             51,005          32,252
                                                     -------------- --------------     --------------- --------------

Other income (expense):
   Interest expense                                       (8,845)        (7,477)           (27,137)        (20,304)
   Amortization of loan and senior notes fees               (631)          (321)            (2,329)         (1,449)
   Interest income                                           162            107                493             335
                                                     -------------- --------------     --------------- --------------
     Other expense, net                                   (9,314)        (7,691)           (28,973)        (21,418)
                                                     -------------- --------------     --------------- --------------

     Net income before income taxes and
       cumulative effect of a change in
       accounting principle                                8,281          8,662             22,032          10,834

Income tax expense                                         3,752          3,599              9,598           4,662
                                                     -------------- --------------     --------------- --------------

     Net income before cumulative effect of a
       change in accounting principle                      4,529          5,063             12,434           6,172

Cumulative effect of a change in accounting
   principle, net of income tax benefit of $367              ---            ---               (544)            ---
                                                     -------------- --------------     --------------- --------------
     Net income                                     $      4,529          5,063             11,890           6,172
                                                     ============== ==============     =============== ==============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.


                                       7
<PAGE>
<TABLE>
                                                       GCI, INC. AND SUBSIDIARIES
                                              CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                                               NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                                                (Unaudited)
<CAPTION>
                                                        Shares of                                          Accumulated
                                                         Class A      Class A                                 Other
                                                         Common       Common       Paid-in    Retained     Comprehensive
(Amounts in thousands, except share amounts)              Stock        Stock       Capital    Deficit      Income (Loss)     Total
                                                       -----------------------------------------------------------------------------
<S>                                                        <C>      <C>             <C>       <C>              <C>          <C>
Balances at December 31, 2001                              100      $ 206,622       44,902    (27,152)            8         224,380
Components of comprehensive income:
  Net income                                               ---            ---          ---      6,172           ---           6,172
  Change in fair value of cash flow hedge, net of
     change in income tax liability of $390                ---            ---          ---        ---          (587)           (587)
                                                                                                                          ----------
      Comprehensive income                                                                                                    5,585
Contribution from General Communication, Inc.              ---            ---          306        ---           ---             306
                                                       -----------------------------------------------------------------------------
Balances at September 30, 2002                             100      $ 206,622       45,208    (20,980)         (579)        230,271
                                                       =============================================================================

Balances at December 31, 2002                              100      $ 206,622       44,904    (20,489)         (540)        230,497
Components of comprehensive income:
   Net income                                              ---            ---          ---     11,890           ---          11,890
   Change in fair value of cash flow hedge, net of
     change in income tax benefit of $175                  ---            ---          ---        ---           118             118
                                                                                                                          ----------
      Comprehensive income                                                                                                   12,008
Contribution to General Communication, Inc.                ---            ---         (188)       ---           ---            (188)
                                                       -----------------------------------------------------------------------------
Balances at September 30, 2003                             100      $ 206,622       44,716     (8,599)         (422)        242,317
                                                       =============================================================================

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


                                       8
<PAGE>
<TABLE>
                                           GCI, INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                             (Unaudited)
                                                                                          Nine Months Ended
                                                                                            September 30,
                                                                                         2003           2002
                                                                                    -------------- --------------
        (Amounts in thousands)
        <S>                                                                        <C>                <C>
        Operating activities:
          Net income                                                               $    11,890          6,172
            Adjustments to reconcile net income to net cash provided by
              operating activities:
                Depreciation, amortization and accretion expense                        39,368         41,806
                Deferred income tax expense                                              9,598          4,757
                Amortization of loan and senior notes fees                               2,329          1,449
                Cumulative effect of a change in accounting principle, net                 544            ---
                Bad debt expense, net of write-offs                                       (679)        10,587
                Deferred compensation                                                      331            533
                Compensatory stock options                                                 393            337
                Employee Stock Purchase Plan expense funded with issuance of
                  General Communication, Inc. Class A common stock                         ---            497
                Other noncash income and expense items                                    (383)            36
                Change in operating assets and liabilities                             (14,351)       (19,078)
                                                                                    -------------- --------------
                  Net cash provided by operating activities                             49,040         47,096
                                                                                    -------------- --------------

        Investing activities:
           Purchases of property and equipment                                         (34,393)       (51,989)
           Payment of deposits                                                          (3,221)           ---
           Notes receivable issued to related parties                                      (99)        (3,055)
           Payments received on notes receivable with related parties                       22            946
           Purchases of other assets                                                      (955)        (1,563)
                                                                                    -------------- --------------
                  Net cash used by investing activities                                (38,646)       (55,661)
                                                                                    -------------- --------------

        Financing activities:
          Repayments of long-term borrowings and capital lease obligations              (9,102)        (6,802)
          Long-term borrowings - bank debt                                                 ---         14,000
          Payment of debt issuance costs                                                (2,605)          (382)
          Cash contribution from (to) General Communication, Inc.                          153           (527)
                                                                                    -------------- --------------
                  Net cash provided (used) by financing activities                     (11,554)         6,289
                                                                                    -------------- --------------

                  Net decrease in cash and cash equivalents                             (1,160)        (2,276)

                  Cash and cash equivalents at beginning of period                      11,940         11,097
                                                                                    -------------- --------------
                  Cash and cash equivalents at end of period                       $    10,780          8,821
                                                                                    ============== ==============

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

                                        9
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                  (Unaudited)

The accompanying unaudited interim condensed consolidated financial statements
include the accounts of GCI, Inc. and its subsidiaries and have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. They should be read in
conjunction with our audited consolidated financial statements for the year
ended December 31, 2002, filed as part of our annual report on Form 10-K. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The results of
operations for interim periods are not necessarily indicative of the results
that may be expected for an entire year or any other period.

(l)     Business and Summary of Significant Accounting Principles

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

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

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

        (b)  Principles of Consolidation
             The consolidated financial statements include the accounts of GCI,
             Inc., GCI, Inc.'s subsidiary GCI Holdings, Inc., GCI Holdings,
             Inc.'s subsidiaries GCI Communication Corp., GCI Cable, Inc., GCI
             Transport Co., Inc., GCI Fiber Communication Co., Inc., GCI Fiber
             Co., Inc. and Fiber Hold Co., Inc. and GCI Fiber Co., Inc.'s and
             Fiber Hold Co., Inc.'s partnership Alaska United Fiber System
             Partnership, GCI Communication Corp.'s subsidiaries Potter View
             Development Co., Inc., Wok 1, Inc. and Wok 2, Inc. and GCI
             Transport Co., Inc.'s subsidiary GCI Satellite Co., Inc. All
             subsidiaries are wholly-owned at September 30, 2003.

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


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

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

        (d)  Accounting for Certain Financial Instruments with Characteristics
             of Both Liabilities and Equity
             On July 1, 2003 we adopted SFAS No. 150, "Accounting for Certain
             Financial Instruments with Characteristics of both Liabilities and
             Equity". SFAS No. 150 establishes standards for how an issuer
             classifies and measures certain financial instruments with
             characteristics of both liabilities and equity. It requires that an
             issuer classify a financial instrument that is within its scope as
             a liability (or an asset in some circumstances). Many of those
             instruments were previously classified as equity. Adoption of SFAS
             No. 150 did not have a material effect on our results of
             operations, financial position and cash flows.

        (e)  Asset Retirement Obligations
             On January 1, 2003 we adopted SFAS No. 143, "Accounting for Asset
             Retirement Obligations". SFAS No. 143 provides accounting and
             reporting standards for costs associated with the retirement of
             long-lived assets. This statement requires entities to record the
             fair value of a liability for an asset retirement obligation in the
             period in which it is incurred. When the liability is initially
             recorded, the entity capitalizes a cost by increasing the carrying
             amount of the related long-lived asset. Over time, the liability is
             accreted to its present value each period, and the capitalized cost
             is depreciated over the useful life of the related asset. Upon
             settlement of the liability, an entity either settles the
             obligation for its recorded amount or incurs a gain or loss upon
             settlement. Upon adoption, we recorded the cumulative effect of
             accretion and depreciation expense as a cumulative effect of a
             change in accounting principle of approximately $544,000, net of
             income tax benefit of $367,000.

             Following is a reconciliation of the beginning and ending aggregate
             carrying amount of our asset retirement obligations at September
             30, 2003 (amounts in thousands):

                    Balance at December 31, 2002                   $     ---
                    Liability recognized upon adoption of SFAS
                      No. 143                                          1,565
                    Accretion expense for the nine months ended
                      September 30, 2003                                  96
                                                                    ----------
                         Balance at September 30, 2003             $   1,661
                                                                    ==========

             Following is the amount of the liability for asset retirement
             obligations as if SFAS No. 143 had been applied at December 31,
             2001 (amounts in thousands):

                    Balance at December 31, 2001                   $   1,350
                                                                    ==========

                    Balance at September 30, 2002                  $   1,511
                                                                    ==========

             At the date of adoption we recorded net additional capitalized
             costs of $654,000 in Property and Equipment in Service, Net of
             Depreciation.

        (f)  Payments Received from Suppliers
             On March 20, 2003 the Financial Accounting Standards Board issued
             Emerging Issues Task Force ("EITF") Issue No. 02-16, "Accounting by
             a Reseller for Cash Consideration Received from a Vendor" ("EITF
             No. 02-16"). We have applied EITF No. 02-16 prospectively for
             arrangements entered into or modified after December 31, 2002. Our
             cable services segment occasionally


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

             receives reimbursements for costs to promote suppliers' services,
             called cooperative advertising arrangements. The supplier payment
             is classified as a reduction of selling, general and administrative
             expenses if it reimburses specific, incremental and identifiable
             costs incurred to resell the suppliers' services. Excess
             consideration, if any, is classified as a reduction of cost of
             sales and services.

             Occasionally our cable services segment enters into a binding
             arrangement with a supplier in which we receive a rebate dependent
             upon us meeting a specified goal. We recognize the rebate as a
             reduction of cost of sales and services systematically as we make
             progress toward the specified goal, provided the amounts are
             probable and reasonably estimable. If earning the rebate is not
             probable and reasonably estimable, it is recognized only when the
             goal is met.

        (g)  Costs Associated with Exit or Disposal Activities
             On January 1, 2003 we adopted SFAS No. 146, "Accounting for Costs
             Associated with Exit or Disposal Activities". Upon adoption of SFAS
             No. 146, enterprises may only record exit or disposal costs when
             they are incurred and can be measured at fair value. The recorded
             liability will be subsequently adjusted for changes in estimated
             cash flows. SFAS 146 revises accounting for specified employee and
             contract terminations that are part of restructuring activities.
             Adoption of SFAS No. 146 did not have a material effect on our
             results of operations, financial position and cash flows.

        (h)  Stock Option Plan
             At September 30, 2003, we had one stock-based employee compensation
             plan. We account for this plan under the recognition and
             measurement principles of Accounting Principles Board ("APB")
             Opinion No. 25, "Accounting for Stock Issued to Employees," and
             related interpretations. We use the intrinsic-value method and
             compensation expense is recorded on the date of grant only if the
             current market price of the underlying stock exceeds the exercise
             price. We have adopted SFAS No. 123, "Accounting for Stock-Based
             Compensation," which permits entities to recognize as expense over
             the vesting period the fair value of all stock-based awards on the
             date of grant. Alternatively, SFAS No. 123 also allows entities to
             continue to apply the provisions of APB Opinion No. 25.

             We have adopted SFAS No. 148, "Accounting for Stock-Based
             Compensation-Transition and Disclosure". This Statement amends SFAS
             No. 123 to provide alternative methods of transition for a
             voluntary change to the fair value based method of accounting for
             stock-based employee compensation. In addition, this Statement
             amends the disclosure requirements of SFAS No. 123 to require
             prominent disclosures in both annual and interim financial
             statements about the method of accounting for stock-based employee
             compensation and the effect of the method used on reported results.
             We have elected to continue to apply the provisions of APB Opinion
             No. 25 and provide the pro forma disclosure as required by SFAS No.
             148.


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

             Stock-based employee compensation cost is reflected over the
             options' vesting period of generally five years and compensation
             cost for options granted prior to January 1, 1996 is not
             considered. The following table illustrates the effect on net
             income for the three and nine months ended September 30, 2003 and
             2002, if we had applied the fair-value recognition provisions of
             SFAS No. 123 to stock-based employee compensation (amounts in
             thousands):
<TABLE>
<CAPTION>
                                                           Three Months Ended           Nine Months Ended
                                                              September 30,               September 30,
                                                        -------------------------    ------------------------
                                                           2003           2002         2003          2002
                                                        -----------    ----------    ---------    -----------
                <S>                                    <C>                <C>         <C>           <C>
                Net income, as reported                $   4,529          5,063       11,890         6,172
                Total stock-based employee
                 compensation expense included in
                 reported net income, net of related
                 tax effects                                  66             59          225           202
                Total stock-based employee
                 compensation expense under the
                 fair-value based method for all
                 awards, net of related tax effects         (653)          (856)      (1,641)       (1,918)
                                                        -----------    ----------    ---------    -----------
                Pro forma net income                   $   3,942          4,266       10,474         4,456
                                                        ===========    ==========    =========    ===========
</TABLE>
             The calculation of total stock-based employee compensation expense
             under the fair-value based method includes weighted-average
             assumptions of a risk-free interest rate, volatility and an
             expected life.

        (i)  Concentrations of Credit Risk
             Financial instruments that potentially subject us to concentrations
             of credit risk are primarily cash and cash equivalents and accounts
             receivable. Excess cash is invested in high quality short-term
             liquid money instruments issued by highly rated financial
             institutions. At September 30, 2003 and December 31, 2002,
             substantially all of our cash and cash equivalents were invested in
             short-term liquid money instruments at one highly rated financial
             institution.

             We have two major customers, MCI and Sprint Corporation. There is
             increased risk associated with these customers' accounts receivable
             balances. Our remaining customers are located primarily throughout
             Alaska. Because of this geographic concentration, our growth and
             operations depend upon economic conditions in Alaska. The economy
             of Alaska is dependent upon the natural resources industries, and
             in particular oil production, as well as tourism, government, and
             United States military spending. Though limited to one geographical
             area and except for MCI and Sprint, the concentration of credit
             risk with respect to our receivables is minimized due to the large
             number of customers, individually small balances, and short payment
             terms.

        (j)  Guarantor's Accounting and Disclosure Requirements for Guarantees,
             Including Indirect Guarantees of Indebtedness of Others
             On January 1, 2003 we adopted FASB Interpretation ("FIN") No. 45,
             "Guarantor's Accounting and Disclosure Requirements for Guarantees,
             Including Indirect Guarantees of Indebtedness of Others". This
             Interpretation elaborates on the disclosures to be made by a
             guarantor in its interim and annual financial statements about its
             obligations under certain guarantees that it has issued. It also
             clarifies that a guarantor is required to recognize, at the
             inception of a guarantee, a


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

             liability for the fair value of the obligation undertaken in
             issuing the guarantee. This Interpretation does not prescribe a
             specific approach for subsequently measuring the guarantor's
             recognized liability over the term of the related guarantee. This
             Interpretation also incorporates, without change, the guidance in
             FIN No. 34, "Disclosure of Indirect Guarantees of Indebtedness of
             Others", which is being superseded. Adoption of FIN No. 45 did not
             have a material effect on our results of operations, financial
             position and cash flows.

        (k)  Derivative Instruments and Hedging Activities
             On July 1, 2003 we adopted SFAS No. 149, "Amendment of Statement
             133 on Derivative Instruments and Hedging Activities". SFAS No. 149
             amends and clarifies financial accounting and reporting for
             derivative instruments, including certain derivative instruments
             embedded in other contracts (collectively referred to as
             derivatives) and for hedging activities under SFAS No. 133,
             "Accounting for Derivative Instruments and Hedging Activities".
             Adoption of SFAS No. 149 did not have a material effect on our
             results of operations, financial position and cash flows.

        (l)  Consolidation of Variable Interest Entities
             On July 1, 2003 we adopted FIN No. 46, "Consolidation of Variable
             Interest Entities". This Interpretation of Accounting Research
             Bulletin No. 51, "Consolidated Financial Statements", addresses
             consolidation by business enterprises of variable interest
             entities, which have one or both of the following characteristics:

             1. The equity investment at risk is not sufficient to permit the
                entity to finance its activities without additional subordinated
                financial support from other parties, which is provided through
                other interests that will absorb some or all of the expected
                losses of the entity.
             2. The equity investors lack one or more of the following essential
                characteristics of a controlling financial interest:
                a. The direct or indirect ability to make decisions about the
                   entity's activities through voting rights or similar rights.
                b. The obligation to absorb the expected losses of the entity if
                   they occur, which makes it possible for the entity to finance
                   its activities.
                c. The right to receive the expected residual returns of the
                   entity if they occur, which is the compensation for the risk
                   of absorbing the expected losses.

             Adoption of FIN No. 46 did not have a material effect on our
             results of operations, financial position and cash flows.

        (m)  Reclassifications
             Reclassifications have been made to the 2002 financial statements
             to make them comparable with the 2003 presentation.


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

(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,                            2003           2002
                                                                           ------------   ------------
              <S>                                                         <C>               <C>
              Increase in accounts receivable                             $   (9,315)       (14,678)
              Increase in inventories                                           (137)        (1,242)
              (Increase) decrease in prepaid and other current assets         (2,434)         1,018
              Increase (decrease) in accounts payable                         (2,802)           453
              Increase in deferred revenues                                    2,211          3,911
              Increase (decrease) in accrued payroll and payroll
                  related obligations                                          3,745         (4,544)
              Decrease in accrued interest                                    (4,977)        (4,793)
              Increase in accrued liabilities                                   (225)           728
              Decrease in subscriber deposits                                   (198)          (187)
              Increase (decrease) in components of other long-term
                 liabilities                                                    (219)           256
                                                                           ------------   ------------
                                                                          $  (14,351)       (19,078)
                                                                           ============   ============
</TABLE>
       We paid interest totaling approximately $32,242,000 and $25,097,000
       during the nine months ended September 30, 2003 and 2002, respectively.

       Effective March 31, 2001 we acquired the assets and customer base of G.C.
       Cablevision, Inc. Upon acquisition the seller received shares of GCI
       Class A common stock with a future payment in additional shares
       contingent upon the market price of GCI Class A common stock on March 31,
       2003. At March 31, 2003 the market price condition was not met and GCI
       issued approximately 222,600 shares of its Class A common stock.

(3)    Intangible Assets
       Cable certificates are allocated to our cable services segment. Goodwill
       is primarily allocated to the cable services segment and the remaining
       amount is not allocated to a reportable segment, but is included in the
       All Other category as described in note 6.
<TABLE>
       Amortization expense for amortizable intangible assets was as follows:
<CAPTION>
                                                  Three Months Ended         Nine Months Ended
                                                     September 30,              September 30,
                                                   2003        2002           2003        2002
                                               ----------- ------------    ----------- -----------
             <S>                              <C>               <C>            <C>         <C>
             Amortization expense             $     195         180            527         567
                                               ==========  ============    =========== ===========
</TABLE>

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

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

             Years ending
             December 31,
           ---------------
                 2003        $  605
                 2004           487
                 2005           355
                 2006           350
                 2007           289

       No intangible assets have been impaired based upon impairment testing
       performed as of December 31, 2002 and no indicators of impairment have
       occurred since the impairment testing was performed.

(4)    MCI Settlement and Release Agreement
       On July 21, 2002 MCI and substantially all of its active U.S.
       subsidiaries filed voluntary petitions for reorganization under Chapter
       11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court.
       Chapter 11 allows a company to continue operating in the ordinary course
       of business in order to maximize recovery for the company's creditors and
       shareholders.

       At the time of the petition for bankruptcy, we had approximately $12.9
       million in receivables outstanding from MCI. At December 31, 2002 the bad
       debt reserve for uncollected amounts due from MCI ("MCI reserve") totaled
       $11.6 million and consisted of all billings for services rendered prior
       to July 21, 2002 that were not paid or deemed recoverable as of December
       31, 2002.

       On July 22, 2003, the United States Bankruptcy Court approved the
       settlement of pre-petition amounts owed to us by MCI and affirmed all of
       our existing contracts with MCI. The settlement settles unpaid balances
       due from MCI for services rendered prior to their bankruptcy filing date,
       settles billing disputes between us, and establishes a right to set-off
       certain of our pre-petition accounts payable to MCI. Under the terms of
       the settlement, we reduced the pre-petition amounts receivable from MCI
       by $1.8 million and off-set our pre-petition accounts payable by $1.0
       million. The majority of the difference reduced the MCI reserve with the
       remainder recorded as bad debt expense.

       The remaining pre-petition accounts receivable balance owed by MCI to us
       after this settlement was $11.1 million ("MCI credit") which we have and
       will use as a credit against amounts payable for future services
       purchased from MCI. At settlement, all of the remaining pre-petition
       amounts receivable due from MCI, which was fully reserved, was removed
       from accounts receivable in our Consolidated Balance Sheet.

       After settlement, we began reducing the MCI credit as we utilize it for
       services otherwise payable to MCI during the same period. The use of the
       credit was and is expected to be recorded as a reduction of bad debt
       expense. During the three months ended September 30, 2003 we utilized
       approximately $1.0 million of the MCI credit against amounts payable for
       services received from MCI during the same period. The settlement
       discussed above and use of the MCI credit resulted in net recovery of bad
       debt expense of approximately $647,000 during the three months ended
       September 30, 2003.

       The remaining unused MCI credit totaled $10.0 million at September 30,
       2003. The credit balance is not recorded on the Consolidated Balance
       Sheet as we are recognizing utilization of the credit as we incur charges
       for services received from MCI.


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

       On July 24, 2003, our contract to provide interstate and intrastate
       long-distance services to MCI was extended for a minimum of five years to
       July 2008. The agreement sets the terms and conditions under which we
       originate and terminate certain types of long distance and data services
       in Alaska on MCI's behalf. In exchange for extending the term of this
       exclusive contract, MCI will receive a series of rate reductions
       implemented in phases over the life of the contract.

       On October 31, 2003, MCI's reorganization plan was approved by the U.S.
       Bankruptcy Court. We expect to evaluate the likelihood that we will
       receive full credit offset for our remaining credit balance when MCI
       exits bankruptcy proceedings and may change our recognition method at
       that time.

(5)    Long-term Debt
       On April 22, 2003 we amended our $225.0 million Senior Facility. On
       October 30, 2003 we closed a $220.0 million bank facility ("new Senior
       Facility") to replace the amended Senior Facility as further described in
       note 8.

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

       We have four reportable segments as follows:

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

         Cable services. We provide cable television services to residential,
         commercial and government users in the State of Alaska. Our cable
         systems serve 33 communities and areas in Alaska, including the state's
         four largest urban areas, Anchorage, Fairbanks, the Matanuska-Susitna
         Valley, and Juneau. We offer digital cable television services in
         Anchorage, the Matanuska-Susitna Valley, Fairbanks, Juneau, Ketchikan,
         Kenai and Soldotna and retail cable modem service (through our Internet
         services segment) in all of our locations in Alaska except Kotzebue.

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

         Internet services. We offer wholesale and retail Internet services to
         both consumer and commercial customers. We offer cable modem service as
         further described in Cable services above. Our undersea fiber optic
         cable systems allow us to offer enhanced services with high-bandwidth
         requirements.

       Included in the "All Other" category in the tables that follow are our
       managed services, product sales and cellular telephone services. None of
       these business units has ever met the quantitative thresholds for
       determining reportable segments. Also included in the All Other category
       are corporate related


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

       expenses including information technology, accounting, legal and
       regulatory, human resources and other general and administrative
       expenses.

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

       We earn all revenues through sales of services and products within the
       United States of America. All of our long-lived assets are located within
       the United States of America, except approximately 72% of our undersea
       fiber optic cable systems which transit international waters.
<TABLE>
       Summarized financial information for our reportable segments for the nine
       months ended September 30, 2003 and 2002 follows (amounts in thousands):
<CAPTION>
                                                       Reportable Segments
                                     ------------------------------------------------------
                                        Long-               Local                 Total
                                       Distance    Cable    Access   Internet   Reportable     All
                                       Services   Services Services  Services    Segments     Other      Total
                                     ------------------------------------------------------------------------------
       <S>                           <C>           <C>      <C>      <C>          <C>        <C>        <C>
                   2003
       Revenues:
         Intersegment                $  10,946      1,900    7,277     1,792       21,915        558     22,473
         External                      153,248     71,009   27,211    14,302      265,770     21,273    287,043
                                     ------------------------------------------------------------------------------
            Total revenues           $ 164,194     72,909   34,488    16,094      287,685     21,831    309,516
                                     ==============================================================================
       Earnings (loss) from
         operations before
         depreciation,
         amortization, net interest
         expense and income taxes    $  81,108     33,153    2,501     2,149      118,911    (26,709)    92,202
                                     ==============================================================================

       Operating income (loss)       $  66,525     19,712     (111)     (380)      85,746    (32,912)    52,834
                                     ==============================================================================

                   2002
       Revenues:
         Intersegment                $  16,578      1,543    7,498     1,447       27,066        558     27,624
         External                      156,221     65,322   23,510    11,412      256,465     19,035    275,500
                                     ------------------------------------------------------------------------------
            Total revenues           $ 172,799     66,865   31,008    12,859      283,531     19,593    303,124
                                     ==============================================================================
       Earnings (loss) from
         operations before
         depreciation,
         amortization, net interest
         expense and income taxes    $  73,440     30,528    2,178    (8,444)      97,702    (22,937)    74,765
                                     ==============================================================================

       Operating income (loss)       $  54,583     18,472     (369)  (11,111)      61,575    (28,615)    32,960
                                     ==============================================================================
</TABLE>


                                       18                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                  (Unaudited)
<TABLE>
       A reconciliation of reportable segment revenues to consolidated revenues
       follows (amounts in thousands):

         Nine months ended September 30,                                         2003            2002
                                                                            --------------- ---------------
         <S>                                                               <C>                  <C>
         Reportable segment revenues                                       $    287,685         283,531
         Plus All Other revenues                                                 21,831          19,593
         Less intersegment revenues eliminated in consolidation                  22,473          27,624
                                                                            --------------- ---------------
              Consolidated revenues                                        $    287,043         275,500
                                                                            =============== ===============
</TABLE>
<TABLE>
       A reconciliation of reportable segment earnings from operations before
       depreciation, amortization and accretion expense, net other expense and
       income taxes to consolidated net income before income taxes and
       cumulative effect of a change in accounting principle follows (amounts in
       thousands):
<CAPTION>
         Nine months ended September 30,                                         2003            2002
                                                                            -------------- ----------------
         <S>                                                               <C>                   <C>
         Reportable segment earnings from operations before
           depreciation, amortization and accretion expense, net other
           expense and income taxes                                        $    118,911          97,702
         Less All Other loss from operations before depreciation,
           amortization and accretion expense, net other expense and
           income taxes                                                          26,709          22,937
         Less intersegment contribution eliminated in consolidation               1,829             707
                                                                            -------------- ----------------
              Consolidated earnings from operations before
                depreciation, amortization and accretion expense, net
                other expense and income taxes                                   90,373          74,058
         Less depreciation, amortization and accretion expense                   39,368          41,806
                                                                            -------------- ----------------
              Consolidated operating income                                      51,005          32,252
         Less other expense, net                                                 28,973          21,418
                                                                            -------------- ----------------
              Consolidated net income before income taxes and cumulative
                effect of a change in accounting principle                 $     22,032          10,834
                                                                            ============== ================
</TABLE>
<TABLE>
       A reconciliation of reportable segment operating income to consolidated
       net income before income taxes and cumulative effect of a change in
       accounting principle follows (amounts in thousands):
<CAPTION>
         Nine months ended September 30,                                          2003             2002
                                                                            --------------- ---------------
         <S>                                                               <C>                   <C>
         Reportable segment operating income                               $     85,746          61,575
         Less All Other operating loss                                           32,912          28,616
         Less intersegment contribution eliminated in consolidation               1,829             707
                                                                            --------------- ---------------
              Consolidated operating income                                      51,005          32,252
         Less other expense, net                                                 28,973          21,418
                                                                            --------------- ---------------
              Consolidated net income before income taxes and cumulative
                effect of a change in accounting principle                 $     22,032          10,834
                                                                            =============== ===============
</TABLE>

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

(7)    Commitments and Contingencies

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

       On July 1, 1999, the Alaska Public Utilities Commission ("APUC") ruled
       that the rural exemptions from local competition for the ILECs operating
       in Juneau, Fairbanks and North Pole would not be continued, which allowed
       us to negotiate for unbundled elements for the provision of competitive
       local service. Alaska Communications Systems, Inc. ("ACS") requested
       reconsideration of this decision and on October 11, 1999, the RCA issued
       an order terminating rural exemptions for the ILECs operating in the
       Fairbanks and Juneau markets. ACS has appealed these decisions. The
       appeal presently is before the Alaska Supreme Court. On February 11,
       2003, the Alaska Supreme Court heard oral argument. One of the principal
       issues in dispute concerns the assignment of the burden of proof. In
       accordance with instructions from the Alaska Superior Court, the APUC
       assigned the burden to ACS at the remand proceeding. At the oral
       argument, several Justices expressed concern with the assignment of the
       burden. At this time, we cannot reasonably predict what the outcome of
       the case will be or even what relief the Court might order if it were to
       find that the burden of proof was improperly assigned to ACS. An adverse
       decision from the Court, however, has the potential to disrupt our
       ability to provide service to our Fairbanks and Juneau customers over our
       facilities. We are unable to predict when the Court will issue their
       decision.

       While the ultimate results of these items cannot be predicted with
       certainty, we do not expect at this time the resolution of them, except
       for the rural exemption proceedings described above, to have a material
       adverse effect on our financial position, results of operations or
       liquidity.

       Fiber Optic Cable System Construction Commitment
       In June 2003 we began work on the construction of a fiber optic cable
       system connecting Seward, Alaska and Warrenton, Oregon, with leased
       backhaul facilities to connect it to our switching and distribution
       centers in Anchorage, Alaska and Seattle, Washington. A consortium of
       companies has been selected to design, engineer, manufacture and install
       the undersea fiber optic cable system and a contract has been signed at a
       total cost to us of $35.2 million. We expect to fund construction of the
       fiber optic cable system through our operating cash flows and, to the
       extent necessary, with draws on our new Senior Facility. During the nine
       month period ended September 30, 2003 our capital expenditures for this
       project have totaled approximately $4.8 million, all of which has been
       funded through our operating cash flows.

       Alaska Airline Miles Agreement
       In August 2003 we entered into an agreement with Alaska Airlines, Inc.
       ("Alaska Airlines") to offer our residential and business customers who
       make qualifying purchases from us the opportunity to accrue mileage
       awards in the Alaska Airlines Mileage Plan. The agreement requires the
       purchase of Alaska Airlines miles during the year ended December 31, 2003
       and in future years.

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


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

(8)    Subsequent Event
       On October 30, 2003 we closed a $220.0 million new Senior Facility to
       replace the April 22, 2003 amended Senior Facility. The new Senior
       Facility reduces the interest rate from LIBOR plus 6.50% to LIBOR plus
       3.25%. The new Senior Facility includes a term loan of $170.0 million and
       a revolving credit facility of $50.0 million.

       The repayment schedule for the term loan in the new Senior Facility is
       unchanged from that in the April 22, 2003 amended Senior Facility. The
       repayment schedule is as follows (amounts in thousands):

                             Date                          Amount
           ------------------------------------------    ----------
           Quarterly from December 31, 2003 to
             December 31, 2004                          $   5,000
           Quarterly from March 31, 2005 to December
             31, 2005                                   $   6,000
           Quarterly from March 31, 2006 to December
             31, 2006                                   $   8,000
           Quarterly from March 31, 2007 to September
             30, 2007                                   $  10,000

       The remaining balance of the new Senior Facility will be payable in full
       on October 31, 2007.
<TABLE>
       We are required to pay a commitment fee on the unused portion of the
       commitment as follows:
<CAPTION>
                                      Commitment fee if the outstanding            Commitment fee if the outstanding
                                      revolving credit facility is > 50%             revolving credit facility is
                                       of the average revolving credit              < 50% of the average revolving
             Total Leverage              facility commitments by the              credit facility commitments by the
           Ratio (as defined)       lenders during such during such period           lenders during such period
          ---------------------    ----------------------------------------    ----------------------------------------
          <S>                                      <C>                                         <C>
          >3.75                                    1.00%                                       1.25%
          -
          >3.25 but <3.75                          0.75%                                       1.00%
          -
          >2.75 but <3.25                          0.50%                                       0.75%
          -
          < 2.75                                   0.50%                                       0.75%
</TABLE>
       We may not permit the Total Leverage Ratio (as defined) to exceed:

                           Period                          Total Leverage Ratio
          ---------------------------------------------   ---------------------
          October 30, 2003 through December 30, 2003              4.25:1
          December 31, 2003 through December 30, 2004             4.00:1
          December 31, 2004 through December 30, 2005             3.75:1
          December 31, 2005 through June 29, 2006                 3.50:1
          June 30, 2006 through June 29, 2007                     3.25:1
          June 30, 2007 through September 29, 2007                3.00:1
          September 30, 2007 through October 31, 2007             2.75:1


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

       We may not permit the Senior Secured Leverage Ratio (as defined) to
       exceed:

                                                             Senior Secured
                           Period                            Leverage Ratio
          ---------------------------------------------     ----------------
          October 30, 2003 through December 30, 2004              2.00:1
          December 31, 2004 through September 29, 2006            1.75:1
          September 30, 2006 through June 29, 2007                1.50:1
          June 30, 2007 through September 29, 2007                1.25:1
          September 30, 2007 through October 31, 2007             1.00:1

       The Interest Coverage Ratio (as defined) may not be less than 2.50:1 at
       any time.

       Capital expenditures, excluding up to $58.0 million incurred to build or
       acquire additional fiber optic cable system capacity between Alaska and
       the lower forty-eight states, in any of the years ended December 31,
       2003, 2004, 2005 and 2006, may not exceed:

           o    $25.0 million, plus
           o    100% of any Excess Cash Flow (as defined) during the applicable
                period less certain permitted investments of up to $5.0 million
                during the applicable period.

       If the revolving credit facility exceeds $25.0 million, we may not incur
       capital expenditures, other than those incurred to build or acquire
       additional fiber optic cable system capacity, in excess of $25.0 million.

       Under the new Senior Facility we must either have repaid in full or
       successfully refinanced our Senior Notes by February 1, 2007.

       $3.5 million of the new Senior Facility has been used to provide a letter
       of credit to secure payment for our contract for the design, engineering,
       manufacture and installation of the undersea fiber optic cable system
       discussed in note 7. The letter of credit will be reduced to $1.8 million
       after a contract payment estimated to be made in March 2004. The letter
       of credit will be cancelled after the final contract payment date
       estimated to be in April 2004.

       Because a portion of the new Senior Facility is a substantial
       modification of the April 22, 2003 amended Senior Facility we will
       recognize approximately $5.0 million in Amortization of Loan and Senior
       Notes Fees during the three months ended December 31, 2003. The remaining
       $2.2 million in Deferred Loan Costs, Net will continue to be amortized
       over the life of the new Senior Facility.

       In connection with the new Senior Facility, we paid bank fees and other
       expenses of $850,000 in October 2003 which will be amortized over the
       life of the new agreement.


                                       22
<PAGE>
PART I.
ITEM 2.

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

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

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

GCI, Inc. was incorporated in 1997 to effect the issuance of senior notes. 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. Shares of GCI, Inc.'s
common stock are not publicly traded.

General Overview
We have experienced significant growth in recent years through strategic
acquisitions, deploying new business lines and expansion of our existing
businesses. We have historically met our cash needs for operations, regular
capital expenditures and maintenance capital expenditures through our cash flows
from operating activities. Historically, cash requirements for significant
acquisitions and major capital expenditures have been provided largely through
our financing activities. We expect to fund the construction of a new fiber
optic cable system through our operating cash flows and, to the extent
necessary, with draws on our new Senior Facility, as further discussed in
Liquidity and Capital Resources included in Part I, Item 2 of this report.

Consolidated revenues increased by $3.8 million during the third quarter of 2003
("2003") as compared to the third quarter in 2002 ("2002"). Operating income
increased by $1.2 million in 2003. Net income before income tax decreased
approximately $400,000 and net income decreased approximately $500,000. Three of
our reportable business segments experienced growth in external revenues from
2002 to 2003 as we continued to strengthen our position in the markets we serve.
The long-distance services segment experienced a decrease in revenue in 2003 as
compared to 2002. The local access services had operating income in 2003 and an
operating loss in 2002. The Internet services segment improved its operating
loss in 2003 as compared to 2002. The operating income for the long-distance
services and cable services segments decreased in 2003 as compared to 2002.


                                       23
<PAGE>
Long-Distance Services Overview
Third quarter 2003 long-distance services revenue represented 54.1% of
consolidated revenues. Our provision of interstate and intrastate long-distance
services, private line and leased dedicated capacity services, and broadband
services accounted for 94.6% of our total long-distance services revenues during
the third quarter of 2003.

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

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

Our contract to provide interstate and intrastate long-distance services to
Sprint was replaced in March 2002 extending its term to March 2007 with two
one-year automatic extensions to March 2009. Beginning in April 2002 the new
contract reduced the rate to be charged by us for certain Sprint traffic over
the extended term of the contract. Additional contractual rate reductions occur
annually through the end of the initial term of the contract.

On July 21, 2002 MCI and substantially all of its active U.S. subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
Code in the United States Bankruptcy Court. Chapter 11 allows a company to
continue operating in the ordinary course of business in order to maximize
recovery for the company's creditors and shareholders.

At the time of the petition for bankruptcy, we had approximately $12.9 million
in receivables outstanding from MCI. At December 31, 2002 the bad debt reserve
for uncollected amounts due from MCI ("MCI reserve") totaled $11.6 million and
consisted of all billings for services rendered prior to July 21, 2002 that were
not paid or deemed recoverable as of December 31, 2002.

On July 22, 2003, the United States Bankruptcy Court approved the settlement of
pre-petition amounts owed to us by MCI and affirmed all of our existing
contracts with MCI. The settlement settles unpaid balances due from MCI for
services rendered prior to their bankruptcy filing date, settles billing
disputes between us, and establishes a right to set-off certain of our
pre-petition accounts payable to MCI. Under the terms of the settlement, we
reduced the pre-petition amounts receivable from MCI by $1.8 million and off-set
our pre-petition accounts payable by $1.0 million. The majority of the
difference reduced the MCI reserve with the remainder recorded as bad debt
expense.

The remaining pre-petition accounts receivable balance owed by MCI to us after
this settlement was $11.1 million ("MCI credit") which we have and will use as a
credit against amounts payable for future services purchased from MCI. At
settlement, all of the remaining pre-petition amounts receivable due from MCI,
which was fully reserved, was removed from accounts receivable in our
Consolidated Balance Sheet.

After settlement, we began reducing the MCI credit as we utilize it for services
otherwise payable to MCI during the same period. The use of the credit was and
is expected to be recorded as a reduction of bad debt expense. During the three
months ended September 30, 2003 we utilized approximately $1.0 million of the
MCI credit against amounts payable for services received from MCI during the
same period. The settlement discussed above and use of the MCI credit resulted
in net recovery of bad debt expense of approximately $647,000 during the three
months ended September 30, 2003.


                                       24
<PAGE>
The remaining unused MCI credit totaled $10.0 million at September 30, 2003. The
credit balance is not recorded on the Consolidated Balance Sheet as we are
recognizing utilization of the credit as we incur charges for services received
from MCI.

On July 24, 2003, our contract to provide interstate and intrastate
long-distance services to MCI was extended for a minimum of five years to July
2008. The agreement sets the terms and conditions under which we originate and
terminate certain types of long distance and data services in Alaska on MCI's
behalf. In exchange for extending the term of this exclusive contract, MCI will
receive a series of rate reductions implemented in phases over the life of the
contract.

On October 31, 2003, MCI's reorganization plan was approved by the U.S.
Bankruptcy Court. MCI has indicated that the company may emerge from bankruptcy
protection soon after the start of 2004. We expect to evaluate the likelihood
that we will receive full credit offset for our remaining credit balance when
MCI exits bankruptcy proceedings and may change our recognition method at that
time. We cannot predict what effect the bankruptcy and reorganization process or
the economy may have on their traffic levels and ultimately, their requirements
for service to and from Alaska.

Recent hearings, media coverage and a U.S. Attorney's office inquiry reflect a
political movement that may be attempting to deny MCI from continuing to provide
services to government agencies. We estimate that 25% to 27% of our MCI revenues
are attributed to their provision of service to government agencies. Our MCI
revenues could be significantly reduced if MCI's government contract traffic
moves from their network to other carriers' networks for which we do not provide
service.

Other common carrier traffic routed to us for termination in Alaska is largely
dependent on traffic routed to MCI and Sprint by their customers. Pricing
pressures, general economic deterioration, new program offerings, business
failures, and market and business consolidations continue to evolve in the
markets served by MCI and Sprint. If, as a result, their traffic is reduced, or
if their competitors' costs to terminate or originate traffic in Alaska are
reduced, our traffic will also likely be reduced, and our pricing may be reduced
to respond to competitive pressures. We are unable to predict the effect on us
of such changes, however given the materiality of other common carrier revenues
to us, a significant reduction in traffic or pricing could have a material
adverse effect on our financial position, results of operations and liquidity.

Due in large part to the favorable synergistic effects of our integrated
approach, the long-distance services segment continues to be a significant
contributor to our overall performance, although the migration of traffic from
voice to data continues.

Cable Services Overview
Third quarter 2003 cable television revenues represented 24.1% of consolidated
revenues. Our cable systems serve 33 communities and areas in Alaska, including
the state's four largest population centers, Anchorage, Fairbanks, the
Matanuska-Susitna Valley and Juneau.

We generate cable services revenues from four primary sources: (1) digital and
analog programming services, including monthly basic and premium subscriptions,
pay-per-view movies and other one-time events, such as sporting events; (2)
equipment rentals and installation; (3) cable modem services (shared with our
Internet services segment); and (4) advertising sales. During the third quarter
of 2003 programming services generated 75.4% of total cable services revenues,
cable services' allocable share of cable modem services accounted for 11.6% of
such revenues, equipment rental and installation fees accounted for 8.9% of such
revenues, advertising sales accounted for 3.3% of such revenues, and other
services accounted for the remaining 0.8% of total cable services revenues.


                                       25
<PAGE>
Effective February 2003, we increased rates charged for certain cable services
and premium packages in six communities, including three of the state's four
largest population centers, Anchorage, Fairbanks and Juneau. Rates increased
approximately 4% for those customers who experienced an adjustment.

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

Our cable services segment faces competition from alternative methods of
receiving and distributing television signals, including but not limited to
direct broadcast satellite ("DBS") and, expected to begin in the fourth quarter
of 2003 or in 2004, digital video service over telephone lines, and from other
sources of news, information and entertainment. Several ILECs in the 48
contiguous states south of or below Alaska ("Lower 48 States") and the largest
ILEC in Alaska have announced marketing arrangements to provide DBS services
along with local telephone and other services. Similar arrangements could be
extended to other ILECs in the markets we serve in Alaska. DBS service provider
Dish Network (EchoStar Communications Corporation) recently announced that local
network programming is available in their Anchorage, Alaska market for an
additional fee. We believe we will continue to be competitive by providing, at
reasonable prices, a greater variety of communication services than are
available off-air or through other alternative delivery sources. Additionally,
we believe we offer superior technical performance and responsive
community-based customer service.

Local Access Services Overview
We generate local access services revenues from three primary sources: (1)
business and residential basic dial tone services; (2) business private line and
special access services; and (3) business and residential features and other
charges, including voice mail, caller ID, distinctive ring, inside wiring and
subscriber line charges. During the third quarter of 2003 local access services
revenues represented 9.7% of consolidated revenues.

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

Our local access services segment faces significant competition in Anchorage,
Fairbanks, and Juneau from the ILEC ACS and from AT&T Alascom, Inc. We began
providing service in the Juneau market in the first quarter of 2002. We believe
our approach to developing, pricing, and providing local access services and
bundling different business segment services will allow us to be competitive in
providing those services.

Operating expenses to prepare our new phone directory are included in the local
access services segment. Revenue and costs of sales and service for our new
phone directory will be included in the local access services segment upon their
recognition.

Internet Services Overview
We generate Internet services revenues from three primary sources: (1) access
product services, including commercial, Internet service provider, and retail
dial-up access; (2) network management services; and (3) Internet services'
allocable share of cable modem services (a portion of cable modem revenue is
also recognized by our cable services segment). During the third quarter of 2003
Internet services segment revenues represented 5.0% of consolidated revenues.


                                       26
<PAGE>
The primary factors that contribute to year-to-year changes in Internet services
revenues may include the average number of subscribers to our services during a
given reporting period, the average monthly subscription rates, the amount of
bandwidth purchased by large commercial customers, and the number and type of
additional premium features selected.

Marketing campaigns continue to be deployed targeting residential and commercial
customers featuring bundled Internet products. Our Internet offerings are
coupled with our 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.

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

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

Revenues included in the All Other category represented 7.1% of total revenues
in the third quarter of 2003 and include managed services revenues totaling $5.6
million, cellular telephone services revenues totaling $903,000 and product
sales revenues totaling $453,000.


                                       27
<PAGE>
                              RESULTS OF OPERATIONS
<TABLE>
The following table sets forth selected Statement of Operations data as a
percentage of total revenues for the periods indicated (unaudited, underlying
data rounded to the nearest thousands):
<CAPTION>
                                                         Three Months Ended                  Nine Months Ended
                                                            September 30,                      September 30,
                                                            -------------                      -------------
                                                                           Percent-                           Percent-
                                                                        age Change (1)                     age Change (1)
                                                                           2003 vs.                           2003 vs.
                                                     2003       2002         2002        2003       2002        2002
                                                     ----       ----         ----        ----       ----        ----
      <S>                                           <C>        <C>         <C>          <C>        <C>        <C>
      Statement of Operations Data:
      Revenues
          Long-distance services                     54.1%      56.9%       (1.1%)       53.4%      56.7%      (1.9%)
          Cable services                             24.1%      23.3%        7.4%        24.7%      23.7%       8.7%
          Local access services                       9.7%       8.6%       17.8%         9.5%       8.5%      15.7%
          Internet services                           5.0%       4.1%       25.3%         5.0%       4.2%      25.3%
          All Other services                          7.1%       7.1%        4.2%         7.4%       6.9%      11.8%
                                                 -----------------------------------------------------------------------
             Total revenues                         100.0%     100.0%        4.0%       100.0%     100.0%       4.2%
      Cost of sales and services                     32.4%      32.1%        4.9%        32.1%      33.6%      (0.3%)
      Selling, general and administrative
        expenses                                     35.9%      34.1%        9.5%        35.7%      34.9%       6.7%
      Bad debt expense                                0.5%       1.8%      (68.2%)        0.7%       4.6%     (85.0%)
      Depreciation, amortization and accretion
        expense                                      13.3%      14.7%       (6.2%)       13.7%      15.2%      (5.8%)
                                                 -----------------------------------------------------------------------
             Operating income                        17.9%      17.3%        7.6%        17.8%      11.7%      58.1%
             Net income before income taxes and
               cumulative effect of a change in
               accounting principle                   8.4%       9.2%        4.4%         7.7%       3.9%     103.4%
             Net income before cumulative
             effect of a change in accounting
             principle                                4.6%       5.4%       10.5%         4.3%       2.2%     101.5%
             Net income                               4.6%       5.4%       10.5%         4.1%       2.2%      92.6%

      Other Operating Data:
      Long-distance services operating income (2)    43.3%      43.9%       (2.5%)       43.4%      34.9%      21.9%
      Cable services operating income (3)            25.2%      29.0%       (6.6%)       27.8%      28.3%       6.7%
      Local access services operating income
        (loss) (4)                                    0.2%     (10.2%)     102.1%        (0.4%)     (1.6%)     69.9%
      Internet services operating loss (5)           (0.4%)    (93.7%)      99.5%        (2.7%)    (97.4%)     96.6%
<FN>
--------------------------
1 Percentage change in underlying data.
2 Computed as a percentage of total external long-distance services revenues.
3 Computed as a percentage of total external cable services revenues.
4 Computed as a percentage of total external local access services revenues.
5 Computed as a percentage of total external Internet services revenues.
--------------------------
</FN>
</TABLE>


                                       28
<PAGE>
Three Months Ended September 30, 2003 ("2003") Compared To Three Months Ended
September 30, 2002 ("2002").

Overview of Revenues and Cost of Sales and Services

Total revenues increased 4.0% from $94.6 million in 2002 to $98.3 million in
2003. The cable services, local access services and Internet services segments
and All Other Services contributed to the increase in total revenues, partially
off-set by a decrease in revenues in the long-distance services segment. See the
discussion below for more information by segment.

Total cost of sales and services increased 4.9% to $31.9 million in 2003. As a
percentage of total revenues, total cost of sales and services increased from
32.1% in 2002 to 32.4% in 2003. The cable services, local access services and
Internet services segments contributed to the increase in total cost of sales
and services, partially off-set by decreases in cost of sales and services in
the long-distance services segment and All Other Services. See the discussion
below for more information by segment.

Long-distance Services Segment Revenues
Total long-distance services segment revenues decreased 1.1% to $53.2 million in
2003.

Message Telephone Service Revenue from Common Carrier Customers
Message telephone service revenues from other common carriers (principally MCI
and Sprint) decreased 7.5% to $24.6 million in 2003 resulting from the
following:

     o   A 9.5% decrease in the average rate per minute on minutes carried for
         other common carriers primarily due to the decreased average rate per
         minute as agreed to in the July 24, 2003 extension of our contract to
         provide interstate and intrastate long-distance services to MCI,
     o   A discount given to a certain other common carrier customer starting in
         2003, and
     o   Revenue earned due to a 2002 increase in the rate per minute of certain
         other common carrier minutes retroactive to April 2002 which did not
         recur in 2003.

The decrease in message telephone service revenues from other common carriers in
2003 was off-set by a 8.5% increase in wholesale minutes carried to 243.6
million minutes.

The economic stagnation in the Lower 48 States appears to have dampened demand
for services provided by our large common carrier customers. To the extent that
these customers experience reduced demand for traffic destined for and
originating in Alaska, it could adversely affect our common carrier traffic. A
protracted economic malaise in the Lower 48 States or a further disruption in
the economy resulting from renewed terrorist activity could affect our carrier
customers which, in turn, could affect our revenues and cash flows.

Message Telephone Service Revenue from Residential, Commercial and Governmental
Customers
Message telephone service revenues from residential, commercial, and
governmental customers decreased 11.5% to $10.1 million in 2003 primarily due to
the following:

     o   A 6.5% decrease in minutes carried for these customers to 70.8 million
         minutes. The decrease is primarily due to the effect of customers
         substituting cellular phone, prepaid calling card and email usage for
         direct dial minutes,
     o   A 8.2% decrease in the average rate per minute to $0.112 per minute
         paid by these customers due to our promotion of and customers'
         enrollment in calling plans offering a certain number of minutes for a
         flat monthly fee, and
     o   A 2.2% decrease in the number of active residential, commercial, and
         governmental customers billed to 86,200 at September 30, 2003 as
         compared to December 31, 2002.


                                       29
<PAGE>
Revenue from Private Line and Private Network Customers
Private line and private network transmission services revenues increased 2.0%
to $9.2 million in 2003.

Revenue from Broadband Customers
Revenues from our packaged telecommunications offering to rural hospital and
health clinic service and our SchoolAccess(TM) offering to rural school
districts increased 46.5% to $6.4 million in 2003. The increase is primarily due
to the following:

     o   Our new SchoolAccess(TM) offering called Distance Learning Service that
         started in late 2002. Distance Learning Service is a video-conference
         based service which enables school districts to provide educational
         opportunities for students within the district and is used by six
         school districts in Alaska, and
     o   An increased number of circuits sold to rural hospitals and health
         clinics.

Long-distance Services Segment Cost of Sales and Services
Long-distance services segment cost of sales and services decreased 0.1% to
$14.4 million in 2003. Long-distance services segment cost of sales and services
as a percentage of long-distance services segment revenues increased from 26.8%
in 2002 to 27.0% in 2003 primarily due to the following:

     o   In the course of business we estimate unbilled long-distance services
         cost of sales and services based upon minutes of use processed through
         our network and established rates. Such estimates are revised when
         subsequent billings are received, payments are made, billing matters
         are researched and resolved, tariffed billing periods lapse, or when
         disputed charges are resolved. In 2003 and 2002, we had favorable
         adjustments of $624,000 and $1.5 million, respectively,
     o   A discount given to a certain other common carrier customer starting in
         2003 without a corresponding decrease in the cost of sales and
         services,
     o   Increased costs associated with additional transponder and network
         back-up capacity in 2003 as compared to 2002, and
     o   The decreased average rate per minute on minutes carried for other
         common carriers as agreed to in the July 24, 2003 extension of our
         contract to provide interstate and intrastate long-distance services to
         MCI.

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

     o   Reductions in access costs due to distribution and termination of our
         traffic on our own local access services network instead of paying
         other carriers to distribute and terminate our traffic. The statewide
         average cost savings is approximately $.011 and $.059 per minute for
         interstate and intrastate traffic, respectively. We expect cost savings
         to continue to occur as long-distance traffic originated, carried, and
         terminated on our own facilities grows, and
     o   A $400,000 refund in 2003 from an intrastate access cost pool that
         previously overcharged us for access services.

Cable Services Segment Revenues and Cost of Sales and Services
Total cable services segment revenues increased 7.4% to $23.7 million and
average gross revenue per average basic subscriber per month increased $3.71 or
6.7% in 2003. Programming services revenues increased 5.4% to $17.9 million in
2003 resulting from the following:

     o   Basic subscribers served increased approximately 700 to approximately
         135,300 at September 30, 2003 as compared to September 30, 2002,


                                       30
<PAGE>
     o   Digital subscriber counts increased 22.1% to approximately 34,800 at
         September 30, 2003 as compared to September 30, 2002, and
     o   Effective February 2003, we increased rates charged for certain cable
         services and premium packages in six communities, including three of
         the state's four largest population centers Anchorage, Fairbanks and
         Juneau. Rates increased approximately 4% for those customers who
         experienced an adjustment.

The cable services segment's share of cable modem revenue (offered through our
Internet services segment) increased $630,000 to $2.7 million in 2003 due to an
increased number of cable modems deployed. Approximately 99% of our cable homes
passed are able to subscribe to our cable modem service. In the second quarter
of 2003 we completed our upgrade of the Ketchikan cable system. Customers in
this system are now able to subscribe to cable modem service.

We now offer digital programming service in Anchorage, the Matanuska-Susitna
Valley, Fairbanks, Juneau, Ketchikan, Kenai, and Soldotna, representing
approximately 89% of our total homes passed at September 30, 2003. We launched
digital programming service in the Matanuska-Susitna Valley and Ketchikan cable
system in 2003.

New facility construction efforts in late 2002 and 2003 resulted in
approximately 5,200 additional homes passed, a 2.7% increase at September 30,
2003 as compared to September 30, 2002. New facility construction efforts in
2003 resulted in approximately 3,300 additional homes passed and a review of
homes passed in the system acquired from Rogers American Cablesystems, Inc.
resulted in approximately 1,900 additional homes passed.

In the second quarter of 2002 we signed new seven-year retransmission agreements
with the five local Anchorage broadcasters and began up-linking and distributing
the local Anchorage programming to all of our cable systems. This local
programming provides additional value to our cable subscribers that not all our
DBS competitors can provide.

Cable services cost of sales and services increased 14.7% to $6.6 million in
2003 due to programming cost increases for most of our cable programming
services offerings. Cable services cost of sales and services as a percentage of
cable services revenues increased from 26.1% in 2002 to 27.9% in 2003 primarily
due to increased discounts given as subscribers enroll in certain cable service
packages.

The increase in cable services cost of sales and services as a percentage of
cable services revenues described above is partially off-set by increasing
amounts of cable modem services sold that generally have higher margins than do
cable programming services.

Local Access Services Segment Revenues and Cost of Sales and Services
Local access services segment revenues increased 17.8% in 2003 to $9.5 million
primarily due to growth in the average number of customers served. At September
30, 2003 an estimated 103,400 lines were in service as compared to approximately
95,000 to 100,000 lines in service at September 30, 2002. We estimate that our
2003 lines in service total represents a statewide market share of approximately
21%. At September 30, 2003 approximately 1,150 additional lines were awaiting
connection. The increase in local access services segment revenues is also
caused by a change in how we provision local access lines in Fairbanks and
Juneau. In 2002 we primarily resold service purchased from ACS. In 2003 we are
benefiting from our facilities build-out with an increased number of access
lines provisioned on our own facilities, UNE loop and UNE platform which allows
us to collect interstate and intrastate access revenues.


                                       31
<PAGE>
Local access services segment cost of sales and services increased 11.3% to $5.9
million in 2003. Local access services segment cost of sales and services as a
percentage of local access services segment revenues decreased from 65.9% in
2002 to 62.2% in 2003, primarily due to reductions in access costs attributed to
changes in how we provision local access lines. The decrease previously
described is partially off-set by decreased network access services revenues
from other carriers as the number of customers purchasing both long-distance and
local access services from us increases.

Our access line mix at September 30, 2003 follows:

     o   Residential lines represent approximately 58% of our lines,
     o   Business customers represent approximately 35% of our lines, and
     o   Internet access customers represent approximately 7% of our lines.

Approximately 87% of our lines are provided on our own facilities and leased
local loops. Approximately 5% of our lines are provided using UNE platform.

The local access services segment operating results are negatively affected by
the allocation of the benefit of access cost savings to the long-distance
services segment. If the local access services segment received credit for the
access charge reductions recorded by the long distance services segment, the
local access services segment operating results would have improved by
approximately $1.6 million and the long distance services segment operating
results would have been reduced by an equal amount in the third quarter of 2003.
Avoided access charges totaled approximately $1.3 million in the same period of
2002. The local access services segment operating results are affected by our
continued evaluation and testing of digital local phone service and Internet
protocol-based technology to deliver phone service through our cable facilities.

Internet Services Segment Revenues and Cost of Sales and Services
Total Internet services segment revenues increased 25.3% to $4.9 million in 2003
primarily due to a 34.2% increase in its allocable share of cable modem revenues
to $2.3 million in 2003 as compared to 2002. The increase in cable modem
revenues is primarily due to growth in the number of cable modems deployed.
Cable modem subscribers increased from approximately 33,000 at September 30,
2002 to approximately 42,800 at September 30, 2003.

At September 30, 2003 we had 93,900 total Internet subscribers, which includes
51,100 dial-up subscribers and 42,800 cable modem subscribers. Our total dial-up
subscribers decreased 1,700 to 51,100 subscribers at September 30, 2003 as
compared to September 30, 2002 as more customers continue to migrate to cable
modems.

We reported a total of 71,400 dial-up Internet subscribers at September 30,
2002. This subscriber count was based upon the total number of active dial-up
subscribers at September 30, 2002. Not all cable modem subscribers paying for a
dial-up plan have activated their dial-up service. When we first started selling
cable modem service it was packaged in a way that almost all cable modem
subscribers were also dial up subscribers. As we introduced new packages and
plans and started promoting our new cable modem LiteSpeed service the number of
cable modem subscribers without a dial up plan increased substantially. An
internal review during the second quarter of 2003 revealed that these subscriber
counts had risen substantially enough that they are now being reported
separately.

The Internet services segment does not share in plan fee revenues associated
with our bundled Internet and long-distance service package. Estimated plan fees
related to this service offering are approximately $1.0 million per quarter and
those revenues are included in the long-distance services segment.


                                       32
<PAGE>
Internet services cost of sales and services increased 23.2% to $1.5 million in
2003, and as a percentage of Internet services revenues, totaled 30.7% and 31.3%
in 2003 and 2002, respectively. The 2003 decrease as a percentage of Internet
services revenues is primarily due to a $582,000 increase in Internet's portion
of cable modem revenue to $2.3 million that generally has higher margins than do
other Internet services products. As Internet services revenues increase,
economies of scale and more efficient network utilization continue to result in
reduced Internet cost of sales and services as a percentage of revenues.

We enhanced the value of our Internet offerings throughout 2002 through the
addition of electronic billing and presentment capabilities and the rollout of a
product called eMail Guard, which filters out e-mail spam and viruses. We
upgraded the download speeds of all of our cable modem Internet service
offerings. These new services and enhancements have proven to be popular with
our customers which we believe is helping to further solidify our customer
relationships.

All Other Revenues and Costs of Sales and Services
All Other revenues increased 4.2% to $7.0 million in 2003 primarily due to
increased monthly revenue earned from a managed services contract with a certain
customer and $400,000 in special project revenue with a certain customer in
2003. The increase in All Other revenues is partially off-set by a decrease in
special project revenue with a certain customer in 2003 as compared to 2002.

Revenues from our GCI Fiber system that runs along the oil pipeline corridor are
continuing to increase and we expect the annual recurring revenue run rate to
increase by an additional two to three million dollars per year by the end of
2003. Additionally, we expect to recognize approximately $6.5 million dollars in
special project revenue in the fourth quarter of 2003.

All Other costs of sales and services decreased 6.1% to $3.4 million in 2003,
and as a percentage of All Other revenues, totaled 49.3% and 54.8% in 2003 and
2002, respectively. The decrease in All Other costs of sales and services as a
percentage of All Other revenues is primarily due to the following:

     o   Increased monthly revenue earned from managed services in 2003 which
         exceeds the corresponding increase in costs of sales or services, and
     o   The recognition of $400,000 in special project revenue in 2003 which
         exceeds the corresponding increase in costs of sales or services.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 9.5% to $35.3 million in
2003 and, as a percentage of total revenues, increased to 35.9% in 2003 from
34.1% in 2002. The 2003 increase in selling, general and administrative expenses
is primarily due to an increased accrual for company-wide success sharing bonus
costs, increased labor costs, costs associated with Alaska regulatory affairs
and the purchase of Alaska Airline miles due to the implementation of our Alaska
Airlines miles program in 2003.

Marketing and advertising expenses as a percentage of total revenues decreased
from 3.2% in 2002 to 2.6% in 2003.

Bad Debt Expense
Bad debt expense decreased 68.2% to $533,000 in 2003 and, as a percentage of
total revenues, decreased to 0.5% in 2003 from 1.8% in 2002. The 2003 decrease
is primarily due to the following:

     o   Recognition of approximately $647,000 of the MCI credit as a reduction
         to bad debt expense in 2003, as further discussed in the Long Distance
         Service Overview included in Part I, Item 2 of this report, and


                                       33
<PAGE>
     o   Provision in 2002 of an additional $1.2 million bad debt reserve for
         uncollected amounts due from MCI resulting from substantially all of
         its active U.S. subsidiaries filing voluntary petitions for
         reorganization under Chapter 11 of the U.S. Bankruptcy Code in the
         United States Bankruptcy Court for the Southern District of New York on
         July 21, 2002.

The decrease in bad debt expense described above is partially off-set by the
recognition of a $550,000 bad debt reserve for uncollected amounts due from a
certain customer in 2003.

Depreciation, Amortization and Accretion Expense
Depreciation, amortization and accretion expense decreased 6.2% to $13.1 million
in 2003. The decrease is primarily attributed to a reduction in the depreciable
value of Property and Equipment due to an adjustment of $18.5 million which was
recorded in 2002 associated with the Kanas Telecom, Inc. acquisition.

The decrease in depreciation, amortization and accretion expense described above
was partially off-set by an increase in depreciation expense due to our $59.2
million investment in equipment and facilities placed into service during 2002
for which a full year of depreciation will be recorded in 2003, and the $28.4
million investment in equipment and facilities placed into service during 2003
for which a partial year of depreciation will be recorded in 2003.

Other Expense, Net
Other expense, net of other income, increased 21.1% to $9.3 million in 2003. The
increase is primarily due to the following:

     o   Increased interest expense due to the increased interest rate paid on
         our April 22, 2003 amended Senior Facility,
     o   Increased deferred loan fee amortization expense due to increased
         deferred loan fees associated with the amended Senior Facility, and
     o   A $269,000 interest benefit earned in 2002 from an interest rate swap
         agreement which was called at no cost by the counterparty and
         terminated on August 1, 2002.

Partially offsetting these increases were a decrease in the average outstanding
indebtedness in 2003 and the capitalization of $128,000 of interest costs due to
the construction of a fiber optic cable system connecting Seward, Alaska and
Warrenton, Oregon.

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

Income tax expense was $3.8 million in 2003 and $3.6 million in 2002. Our
effective income tax rate changed from 41.5% in 2002 to 45.3% in 2003 due to the
effect of items that are nondeductible for income tax purposes.

At September 30, 2003, we have (1) tax net operating loss carryforwards of
approximately $196.2 million that will begin expiring in 2005 if not utilized,
and (2) alternative minimum tax credit carryforwards of approximately $1.9
million available to offset regular income taxes payable in future years. Our
utilization of certain net operating loss carryforwards is subject to
limitations pursuant to Internal Revenue Code section 382.

Tax benefits associated with recorded deferred tax assets are considered to be
more likely than not realizable through future reversals of existing taxable
temporary differences and future taxable income exclusive of


                                       34
<PAGE>
reversing temporary differences and carryforwards. The amount of deferred tax
asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced
which would result in additional income tax expense. We estimate that our
effective income tax rate for financial statement purposes will be 43% to 47% in
2003.

Nine Months Ended September 30, 2003 ("2003") Compared To Nine Months Ended
September 30, 2002 ("2002").

Overview of Revenues and Cost of Sales and Services

Total revenues increased 4.2% from $275.5 million in 2002 to $287.0 million in
2003. The cable services, local access services and Internet services segments
and All Other Services contributed to the increase in total revenues, partially
off-set by a decrease in revenues in the long-distance services segment. See the
discussion below for more information by segment.

Total cost of sales and services decreased 0.3% to $92.2 million in 2003. As a
percentage of total revenues, total cost of sales and services decreased from
33.6% in 2002 to 32.1% in 2003. The long-distance services segment contributed
to the decrease in total cost of sales and services, partially off-set by
increases in costs of sales and services in the cable services, local access
services and Internet services segments and All Other Services. See the
discussion below for more information by segment.

Long-distance Services Segment Revenues
Total long-distance services segment revenues decreased 1.9% to $153.2 million
in 2003.

Message Telephone Service Revenue from Common Carrier Customers
Message telephone service revenues from other common carriers (principally MCI
and Sprint) decreased 8.2% to $68.7 million in 2003 resulting from the
following:

     o   A 9.5% decrease in the average rate per minute on minutes carried for
         other common carriers primarily due to the decreased average rate per
         minute as agreed to in the July 24, 2003 extension of our contract to
         provide interstate and intrastate long-distance services to MCI,
     o   A discount given to a certain other common carrier customer starting in
         the third quarter of 2003, and
     o   Revenue earned due to a 2002 increase in the rate per minute of certain
         other common carrier minutes retroactive to April 2002 which did not
         recur in 2003.

The decrease in message telephone service revenues from other common carriers in
2003 was partially off-set by a 1.5% increase in wholesale minutes carried to
639.4 million minutes.

The economic stagnation in the Lower 48 States appears to have dampened demand
for services provided by our large common carrier customers. To the extent that
these customers experience reduced demand for traffic destined for and
originating in Alaska, it could adversely affect our common carrier traffic. A
protracted economic malaise in the Lower 48 States or a further disruption in
the economy resulting from renewed terrorist activity could affect our carrier
customers which, in turn, could affect our revenues and cash flows.

Message Telephone Service Revenue from Residential, Commercial and Governmental
Customers
Message telephone service revenues from residential, commercial, and
governmental customers decreased 13.9% to $30.5 million in 2003 primarily due to
the following:

     o   A 8.5% decrease in minutes carried for these customers to 215.3 million
         minutes. The decrease is primarily due to the loss of approximately 4.0
         million to 4.5 million minutes earned from a certain


                                       35
<PAGE>
         retail customer in 2002 but not earned in 2003 and the effect of
         customers substituting cellular phone, prepaid calling card and email
         usage for direct dial minutes,
     o   A 11.8% decrease in the average rate per minute to $0.112 per minute
         paid by these customers due to our promotion of and customers'
         enrollment in calling plans offering a certain number of minutes for a
         flat monthly fee, and
     o   A 2.2% decrease in the number of active residential, commercial, and
         governmental customers billed to 86,200 at September 30, 2003 as
         compared to December 31, 2002.

Revenue from Private Line and Private Network Customers
Private line and private network transmission services revenues increased 1.5%
to $27.4 million in 2003.

Revenue from Broadband Customers
Revenues from our packaged telecommunications offering to rural hospital and
health clinic service and our SchoolAccess(TM) offering to rural school
districts increased 37.8% to $18.4 million in 2003. The increase is primarily
due to the following:

     o   Our new SchoolAccess(TM) offering called Distance Learning Service that
         started in late 2002. Distance Learning Service is a video-conference
         based service which enables school districts to provide educational
         opportunities for students within the district and is used by six
         school districts in Alaska,
     o   An increased number of circuits sold to rural hospitals and health
         clinics, and
     o   Equipment sales to one customer.

Long-distance Services Segment Cost of Sales and Services
Long-distance services segment cost of sales and services decreased 13.6% to
$39.5 million in 2003. Long-distance services segment cost of sales and services
as a percentage of long-distance services segment revenues decreased from 29.3%
in 2002 to 25.8% in 2003 primarily due to the following:

     o   Reductions in access costs due to distribution and termination of our
         traffic on our own local access services network instead of paying
         other carriers to distribute and terminate our traffic. The statewide
         average cost savings is approximately $.011 and $.059 per minute for
         interstate and intrastate traffic, respectively. We expect cost savings
         to continue to occur as long-distance traffic originated, carried, and
         terminated on our own facilities grows,
     o   The FCC MAG reform order reducing the interstate access rates paid by
         interexchange carriers to LECs beginning July 2002,
     o   A $2.3 million refund ($1.9 million after deducting certain direct
         costs) in 2003 from a local exchange carrier in respect of its earnings
         that exceeded regulatory requirements, and
     o   A $1.3 million refund in 2003 from an intrastate access cost pool that
         previously overcharged us for access services.

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

     o   Increased costs associated with additional transponder and network
         back-up capacity in 2003 as compared to 2002,
     o   A discount given to a certain other common carrier customer starting in
         the third quarter of 2003 without a corresponding decrease in the cost
         of sales and services,
     o   The decreased average rate per minute on minutes carried for other
         common carriers as agreed to in the July 24, 2003 extension of our
         contract to provide interstate and intrastate long-distance services to
         MCI, and


                                       36
<PAGE>
     o   A decrease in a favorable adjustment from $4.0 million in 2002 to $1.4
         million in 2003. In the course of business we estimate unbilled
         long-distance services cost of sales and services based upon minutes of
         use processed through our network and established rates. Such estimates
         are revised when subsequent billings are received, payments are made,
         billing matters are researched and resolved, tariffed billing periods
         lapse, or when disputed charges are resolved.

Cable Services Segment Revenues and Cost of Sales and Services
Total cable services segment revenues increased 8.7% to $71.0 million and
average gross revenue per average basic subscriber per month increased $4.08 or
7.4% in 2003. Programming services revenues increased 8.2% to $54.6 million in
2003 resulting from the following:

     o   Basic subscribers served increased approximately 700 to approximately
         135,300 at September 30, 2003 as compared to September 30, 2002,
     o   Digital subscriber counts increased 22.1% to approximately 34,800 at
         September 30, 2003 as compared to September 30, 2002, and
     o   Effective February 2003, we increased rates charged for certain cable
         services and premium packages in six communities, including three of
         the state's four largest population centers Anchorage, Fairbanks and
         Juneau. Rates increased approximately 4% for those customers who
         experienced an adjustment.

The cable services segment's share of cable modem revenue (offered through our
Internet services segment) increased 38.8% to $8.0 million in 2003 due to an
increased number of cable modems deployed. Approximately 99% of our cable homes
passed are able to subscribe to our cable modem service. In the second quarter
of 2003 we completed our upgrade of the Ketchikan cable system. Customers in
this system are now able to subscribe to cable modem service.

We now offer digital programming service in Anchorage, the Matanuska-Susitna
Valley, Fairbanks, Juneau, Ketchikan, Kenai, and Soldotna, representing
approximately 89% of our total homes passed at September 30, 2003. We launched
digital programming service in the Matanuska-Susitna Valley and Ketchikan cable
system in 2003.

New facility construction efforts in late 2002 and 2003 resulted in
approximately 5,200 additional homes passed, a 2.7% increase at September 30,
2003 as compared to September 30, 2002. New facility construction efforts in
2003 resulted in approximately 3,300 additional homes passed and a review of
homes passed in the system acquired from Rogers American Cablesystems, Inc.
resulted in approximately 1,900 additional homes passed.

In the second quarter of 2002 we signed new seven-year retransmission agreements
with the five local Anchorage broadcasters and began up-linking and distributing
the local Anchorage programming to all of our cable systems. This local
programming provides additional value to our cable subscribers that not all our
DBS competitors can provide.

Cable services cost of sales and services increased 9.6% to $19.4 million in
2003 due to programming cost increases for most of our cable programming
services offerings. Cable services cost of sales and services as a percentage of
cable services revenues increased from 27.2% in 2002 to 27.4% in 2003 primarily
due to rate increases by programming vendors exceeding our rate adjustments. The
increase described above is partially off-set by a $182,000 favorable adjustment
to cable services cost of sales and services in 2003 after completion of audits
by certain cable programming service vendors and increasing amounts of cable
modem services sold that generally have higher margins than do cable programming
services.


                                       37
<PAGE>
In October 2002 we, along with the other largest publicly traded multiple system
operators ("MSOs") signed a pledge to support and adhere to new voluntary
reporting guidelines on common operating statistics to provide investors and
others with a better understanding of our operations. Our operating statistics
include capital expenditures and customer information from our cable services
segment and the components of our local access services and Internet services
segments which offer services utilizing our cable services' facilities.

Our capital expenditures by standard reporting category for the nine months
ending September 30, 2003 and 2002 follows (amounts in thousands):

                                                        2003         2002
                                                     ---------    ---------
    Customer premise equipment ("CPE")              $  6,880        5,763
    Commercial                                           395          443
    Scalable infrastructure                            1,000        2,757
    Line extensions                                      645          620
    Upgrade/rebuild                                    1,816        3,846
    Support capital                                      313        5,398
                                                     ---------    ---------
      Sub-total                                       11,049       18,827

    Remaining reportable segments and All Other
      capital expenditures                            23,344       33,162
                                                     ---------    ---------
                                                    $ 34,393       51,989
                                                     =========    =========

During the nine months ending September 30, 2003 we decreased our capital
expenditures for all of our reportable segments as compared to the same period
in 2002. The decrease was due, in part, to capital expenditure limitations
required by our Senior Facility, which we closed on November 1, 2002. On April
22, 2003 we amended our Senior Facility agreement and on October 30, 2003 we
closed a new Senior Facility. The April 22, 2003 amendment and the new Senior
Facility among other items, increase the amount we may incur for capital
expenditures. For a discussion of the Senior Facility amendment, see Liquidity
and Capital Resources included in Part I, Item 2 of this report.

The standardized definition of a customer relationship is the number of
customers that receive at least one level of service, encompassing voice, video,
and data services, without regard to which services customers purchase. At
September 30, 2003 and 2002 we had 122,379 and 120,133 customer relationships,
respectively.

The standardized definition of a revenue generating unit is the sum of all
primary analog video, digital video, high-speed data, and telephony customers,
not counting additional outlets. At September 30, 2003 and 2002 we had 178,168
and 167,606 revenue generating units, respectively.


                                       38
<PAGE>
Local Access Services Segment Revenues and Cost of Sales and Services
Local access services segment revenues increased 15.7% in 2003 to $27.2 million
primarily due to growth in the average number of customers served. At September
30, 2003, 103,400 lines were in service as compared to approximately 95,000 to
100,000 lines in service at September 30, 2002. We estimate that our 2003 lines
in service total represents a statewide market share of approximately 21%. At
September 30, 2003 approximately 1,150 additional lines were awaiting
connection. The increase in local access services segment revenues is also
caused by a change in how we provision local access lines in Fairbanks and
Juneau. In 2002 we primarily resold service purchased from ACS. In 2003 we are
benefiting from our facilities build-out with an increased number of access
lines provisioned on our own facilities, UNE loop and UNE platform which allows
us to collect interstate and intrastate access revenues.

The increase in local access services revenues described above was partially
off-set by the following:

     o   The FCC MAG reform order reducing the interstate access rates paid by
         interexchange carriers to LECs beginning July 2002, and
     o   A reduction in July 2002 in interstate access rates charged by us to
         interexchange carriers in response to an FCC order forcing a competitor
         to reduce their interstate access rates.

Local access services segment cost of sales and services increased 16.6% to
$17.4 million in 2003. Local access services segment cost of sales and services
as a percentage of local access services segment revenues increased from 63.7%
in 2002 to 64.1% in 2003, primarily due to the following:

     o   Decreased network access services revenues from other carriers as the
         number of customers purchasing both long-distance and local access
         services from us increases, and
     o   The effect of the revenue decreases from interstate access rates
         described above with no corresponding decrease in the cost of sales and
         services.

Partially offsetting the items described above are reductions in access costs
attributed to our conversion of service provided on a wholesale basis to service
provided through our own facilities.

Our access line mix at September 30, 2003 follows:

     o   Residential lines represent approximately 58% of our lines,
     o   Business customers represent approximately 35% of our lines, and
     o   Internet access customers represent approximately 7% of our lines.

Approximately 87% of our lines are provided on our own facilities and leased
local loops. Approximately 5% of our lines are provided using UNE platform.

The local access services segment operating results are negatively affected by
the allocation of the benefit of access cost savings to the long-distance
services segment. If the local access services segment received credit for the
access charge reductions recorded by the long distance services segment, the
local access services segment operating results would have improved by
approximately $5.1 million and the long distance services segment operating
results would have been reduced by an equal amount in 2003. Avoided access
charges totaled approximately $5.5 million in 2002. The decrease in the avoided
access charge in 2003 is due to the FCC MAG reform order reducing the interstate
access rates paid by interexchange carriers to LECs beginning July 2002 and a
reduction in July 2002 in interstate access rates charged by us to interexchange
carriers in response to an FCC order forcing a competitor to reduce their
interstate access rates. The local access services segment operating results are
affected by our continued evaluation and testing of digital local phone service
and Internet protocol-based technology to deliver phone service through our
cable facilities.


                                       39
<PAGE>
Internet Services Segment Revenues and Cost of Sales and Services
Total Internet services segment revenues increased 25.3% to $14.3 million in
2003 primarily due to the $1.8 million increase in its allocable share of cable
modem revenues to $6.5 million in 2003 as compared to 2002. The increase in
cable modem revenues is primarily due to growth in the number of cable modems
deployed. Cable modem subscribers increased from approximately 33,000 at
September 30, 2002 to approximately 42,800 at September 30, 2003.

At September 30, 2003 we had 93,900 total Internet subscribers, which includes
51,100 dial-up subscribers and 42,800 cable modem subscribers. Our total dial-up
subscribers decreased 1,700 to 51,100 subscribers at September 30, 2003 as
compared to September 30, 2002 as more customers continue to migrate to cable
modems.

We reported a total of 71,400 dial-up Internet subscribers at September 30,
2002. This subscriber count was based upon the total number of active dial-up
subscribers at September 30, 2002. Not all cable modem subscribers paying for a
dial-up plan have activated their dial-up service. When we first started selling
cable modem service it was packaged in a way that almost all cable modem
subscribers were also dial up subscribers. As we introduced new packages and
plans and started promoting our new cable modem LiteSpeed service the number of
cable modem subscribers without a dial up plan increased substantially. An
internal review during the second quarter of 2003 revealed that these subscriber
counts had risen substantially enough that they are now being reported
separately.

The Internet services segment does not share in plan fee revenues associated
with our bundled Internet and long-distance service package. Estimated plan fees
related to this service offering are approximately $1.0 million per quarter and
those revenues are included in the long-distance services segment.

Internet services cost of sales and services increased 21.4% to $4.3 million in
2003, and as a percentage of Internet services revenues, totaled 30.3% and 31.3%
in 2003 and 2002, respectively. The 2003 decrease as a percentage of Internet
services revenues is primarily due to a $1.8 million increase in Internet's
portion of cable modem revenue that generally has higher margins than do other
Internet services products. As Internet services revenues increase, economies of
scale and more efficient network utilization continue to result in reduced
Internet cost of sales and services as a percentage of revenues.

We enhanced the value of our Internet offerings throughout 2002 through the
addition of electronic billing and presentment capabilities and the rollout of a
product called eMail Guard, which filters out e-mail spam and viruses. We
upgraded the download speeds of all of our cable modem Internet service
offerings. These new services and enhancements have proven to be popular with
our customers which we believe is helping to further solidify our customer
relationships.

All Other Revenues and Costs of Sales and Services
All Other revenues increased 11.8% to $21.3 million in 2003. The increase in
revenues is primarily due to the following:

     o   A $1.4 million increase in product sales to $2.3 million due to sales
         of product to two customers in 2003,
     o   A payment of $327,000 from a customer to acknowledge our ability to
         maintain certain costs below a stated budget,
     o   Increased monthly revenue earned from a managed services contract with
         a certain customer, and
     o   $400,000 in special project revenue in 2003.


                                       40
<PAGE>
The increase in All Other revenues is partially off-set by a $1.1 million
decrease in special project revenue from a certain customer in 2003 as compared
to 2002.

Revenues from our GCI Fiber system that runs along the oil pipeline corridor are
continuing to increase and we expect the annual recurring revenue run rate to
increase by an additional two to three million dollars per year by the end of
2003. Additionally, we expect to recognize approximately $6.5 million dollars in
special project revenue in the fourth quarter of 2003.

All Other costs of sales and services increased 9.6% to $11.5 million in 2003,
and as a percentage of All Other revenues, totaled 54.0% and 55.1% in 2003 and
2002, respectively. The decrease in All Other costs of sales and services as a
percentage of All Other revenues is primarily due to the following:

     o   Increased monthly revenue earned from managed services in 2003 which
         exceeds the corresponding increase in costs of sales or services,
     o   The recognition of $400,000 in special project revenue in 2003 which
         exceeds the corresponding increase in costs of sales or services,
     o   A payment of $327,000 from a customer in 2003 to acknowledge our
         ability to maintain certain costs below a stated budget with no
         corresponding increase in costs of sales or services, and
     o   A $140,000 favorable adjustment in 2003 due to a revision of an
         estimate of a previously unbilled cost of sales and service upon
         receipt of the invoice.

The decrease in All Other costs of sales and services as a percentage of All
Other revenues is partially off-set by the sales of product to two customers in
2003 which have a higher cost of sales as a percentage of revenues than do
managed services.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 6.7% to $102.5 million in
2003 and, as a percentage of total revenues, increased to 35.7% in 2003 from
34.9% in 2002. The 2003 increase in selling, general and administrative expenses
is primarily due to an increased accrual for company-wide success sharing bonus
costs, increased labor and health insurance costs, costs associated with Alaska
regulatory affairs, and the purchase of Alaska Airline miles due to the
implementation of our Alaska Airlines miles program in 2003. The 2003 increase
is off-set by costs incurred in 2002 for our unsuccessful bid to purchase
certain assets of WCI Cable, Inc. and its subsidiaries.

Marketing and advertising expenses as a percentage of total revenues decreased
from 3.3% in 2002 to 2.6% in 2003.

Bad Debt Expense
Bad debt expense decreased 85.0% to $1.9 million in 2003 and, as a percentage of
total revenues, decreased to 0.7% in 2003 from 4.6% in 2002. The 2003 decrease
is primarily due to the following:

     o   Recognition of approximately $647,000 of the MCI credit as a reduction
         to bad debt expense in 2003, as further discussed in the Long Distance
         Service Overview included in Part I, Item 2 of this report, and
     o   Provision in 2002 of a $11.0 million bad debt reserve for uncollected
         amounts due from MCI resulting from substantially all of its active
         U.S. subsidiaries filing voluntary petitions for reorganization under
         Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy
         Court for the Southern District of New York on July 21, 2002.

The decrease in bad debt expense described above is partially off-set by
recognition of a $550,000 bad debt reserve for uncollected amounts due from a
certain customer in 2003.


                                       41
<PAGE>
Depreciation, Amortization and Accretion Expense
Depreciation, amortization and accretion expense decreased 5.8% to $39.4 million
in 2003. The decrease is primarily attributed to a reduction in the depreciable
value of Property and Equipment due to an adjustment of $18.5 million which was
recorded in 2002 associated with the Kanas Telecom, Inc. acquisition.

The decrease in depreciation, amortization and accretion expense described above
was partially off-set by an increase in depreciation expense due to our $59.2
million investment in equipment and facilities placed into service during 2002
for which a full year of depreciation will be recorded in 2003, and the $28.4
million investment in equipment and facilities placed into service during 2003
for which a partial year of depreciation will be recorded in 2003.

Other Expense, Net
Other expense, net of other income, increased 35.3% to $29.0 million in 2003.
The increase is primarily due to the following:

     o   Increased interest expense due to the increased interest rate paid on
         our amended Senior Facility,
     o   Increased deferred loan fee expense due to the increased deferred loan
         fees associated with the amended Senior Facility, and
     o   A $1.2 million interest benefit earned in 2002 from an interest rate
         swap agreement which was called at no cost by the counter party and
         terminated on August 1, 2002.

Partially offsetting these increases was a decrease in the average outstanding
indebtedness in 2003 and the capitalization of $128,000 of interest costs due to
the commencement of construction of a fiber optic cable system connecting
Seward, Alaska and Warrenton, Oregon.

Income Tax Expense
GCI, Inc., as a wholly owned subsidiary and member of the GCI controlled group
of corporations, files its income tax returns as part of the consolidated group
of corporations under GCI. Accordingly, the following discussion reflects the
consolidated group's activity. Income tax expense was $9.6 million in 2003 and
$4.7 million in 2002. The change was due to increased net income before income
taxes and cumulative effect of a change in accounting principle in 2003 as
compared to 2002. Our effective income tax rate increased from 43.0% in 2002 to
43.6% in 2003 due to the effect of items that are nondeductible for income tax
purposes.


                                       42
<PAGE>
                 FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
<TABLE>
The following chart provides selected unaudited statement of operations data
from our quarterly results of operations during 2003 and 2002:
<CAPTION>
                                                                         (Amounts in thousands)
                                                      -------------------------------------------------------------
                                                          First      Second       Third      Fourth
                                                         Quarter     Quarter     Quarter     Quarter      Total
                                                      -------------------------------------------------------------
     <S>                                             <C>              <C>         <C>         <C>        <C>
     2003
     ----
     Revenues:
       Long-distance services                        $    48,486      51,570      53,191                 153,247
       Cable services                                $    23,438      23,872      23,699                  71,009
       Local access services                         $     8,426       9,245       9,540                  27,211
       Internet services                             $     4,590       4,790       4,922                  14,302
       All Other services                            $     7,837       6,462       6,975                  21,274
                                                      ------------------------------------            -------------
          Total revenues                             $    92,777      95,939      98,327                 287,043
     Operating income                                $    15,438      17,972      17,595                  51,005
     Net income before income taxes and
       cumulative effect of a change in
       accounting principle                          $     5,377       8,374       8,281                  22,032
     Net income before cumulative effect of a
       change in accounting principle                $     3,095       4,810       4,529                  12,434
     Net income                                      $     2,551       4,810       4,529                  11,890
                                                      ====================================            =============
     2002
     ----
     Revenues:
       Long-distance services                        $    50,068      52,375      53,778      48,711     204,932
       Cable services                                $    21,346      21,919      22,057      23,366      88,688
       Local access services                         $     7,308       8,106       8,096       8,561      32,071
       Internet services                             $     3,573       3,912       3,927       4,172      15,584
       All Other services                            $     5,915       6,428       6,692       7,532      26,567
                                                      -------------------------------------------------------------
          Total revenues                             $    88,210      92,740      94,550      92,342     367,842
     Operating income (1)                            $    11,133       4,766      16,353      13,473      45,725
     Net income (loss) before income taxes (1)       $     3,858      (1,686)      8,662       1,488      12,322
     Net income (loss) (1)                           $     2,212      (1,103)      5,063         491       6,663
                                                      =============================================================
<FN>
     -------------------
     1  The second and third quarters of 2002 include the provision of $9.7
        million and $1.2 million, respectively, of bad debt expense for
        estimated uncollectible accounts due from MCI.
     -------------------
</FN>
</TABLE>
Overview of Revenues and Cost of Sales and Services
Total revenues for the quarter ended September 30, 2003 ("third quarter") were
$98.3 million, representing a 2.5% increase from $95.9 million for the quarter
ended June 30, 2003 ("second quarter"). The long-distance services, local
services and Internet services segments and All Other Services contributed to
the increase in total revenues, partially off-set by a decrease in revenues from
the cable services segment.

Cost of sales and services increased from $30.1 million in the second quarter to
$31.9 million in the third quarter. As a percentage of revenues, second and
third quarter cost of sales and services totaled 31.3% and 32.4%, respectively.
All of our reportable segments and All Other Services contributed to the
increase in total cost of sales and services.


                                       43
<PAGE>
Long-distance Services Segment Revenues and Cost of Sales and Services
Third quarter long-distance services segment revenues increased 3.1% to $53.2
million as compared to the second quarter. The increase resulted primarily from
increased revenues from other common carrier customers and increased broadband
revenue, off-set by a decrease in revenues from residential, commercial, and
governmental customers and decreased private line revenue.

Revenues from other common carrier customers increased 7.3% to $24.6 million in
the third quarter as compared to the second quarter. Minutes carried for other
common carriers increased 16.7% to 243.6 million minutes. The increased revenues
from other common carrier customers was partially off-set by the following:

     o   A 4.1% decrease in the average rate per minute on minutes carried for
         other common carriers in the third quarter as compared to the second
         quarter primarily due to the July 24, 2003 extension of our contract to
         provide interstate and intrastate long-distance services to MCI, and
     o   A discount given to a certain other common carrier customer starting in
         the third quarter.

Revenues from residential, commercial, and governmental customers decreased 0.5%
to $10.1 million in the third quarter primarily due to the following:

     o   A 2.4% decrease in retail minutes carried for residential, commercial
         and governmental customers to 70.8 million minutes, and
     o   A 2.3% decrease in the number of active residential, commercial, and
         governmental customers billed to 86,200 at September 30, 2003 as
         compared to June 30, 2003.

The average rate per minute on minutes carried for residential, commercial and
governmental customers remained steady in the second and third quarters at
$0.112 per minute.

Private line and private network transmission services revenues decreased
$212,000 to $9.2 million in the third quarter as compared to the second quarter
primarily due to various individually immaterial credits given to customers.

Long-distance revenues have historically been highest in the summer months
because of temporary population increases attributable to tourism and increased
seasonal economic activity such as construction, commercial fishing, and oil and
gas activities.

Revenues from our packaged telecommunications offering to rural hospital and
health clinic service and our SchoolAccess(TM) offering to rural school
districts increased $95,000 to $6.4 million in the third quarter.

The increase in revenues from our packaged telecommunications offering to rural
hospital and health clinic service and our SchoolAccess(TM) offering to rural
school districts described above was partially off-set by an equipment sale to
one customer in the second quarter which did not recur in the third quarter.

Long-distance services cost of sales and services increased 10.4% to $14.4
million in the third quarter. Long-distance services cost of sales and services
as a percentage of long-distance services revenues increased from 25.3% in the
second quarter to 27.0% in the third quarter primarily due to the following:

     o   A decrease in a refund from an intrastate access cost pool that
         previously overcharged us for access services from $861,000 refund in
         the second quarter to $400,000 in the third quarter,
     o   A decrease in a favorable adjustment from $749,000 in the second
         quarter to $624,000 in the third quarter. In the course of business we
         estimate unbilled long-distance services cost of sales and services
         based upon minutes of use processed through our network and established
         rates. Such


                                       44
<PAGE>
         estimates are revised when subsequent billings are received, payments
         are made, billing matters are researched and resolved, tariffed billing
         periods lapse, or when disputed charges are resolved,
     o   A discount given to a certain other common carrier customer starting in
         the third quarter, and
     o   The decreased average rate per minute on minutes carried for other
         common carriers as agreed to in the July 24, 2003 extension of our
         contract to provide interstate and intrastate long-distance services to
         MCI.

Cable Services Segment Revenues and Cost of Sales and Services
Cable services segment revenues decreased 0.7% to $23.7 million. The decrease in
cable services segment revenues is primarily due to a 3.6% decrease in
programming services revenues to $17.9 million in the third quarter resulting
from a decrease in basic subscribers served from 137,200 at June 30, 2003 to
135,300 at September 30, 2003 due in part, to seasonality.

The decrease in programming services revenues described above is partially
off-set by the following:

     o   Digital subscriber counts increased 13.4% to approximately 34,800 at
         September 30, 2003 as compared to June 30, 2003. Digital subscriber
         counts have increased without a corresponding increase in programming
         services revenues due to our promotional offerings in the third quarter
         of discounted cable service packages to increase customer retention,
         and
     o   Average gross revenue per average basic subscriber per month increased
         $0.39 or 0.6% in the third quarter as compared to the second quarter.

The decrease in cable services segment revenue is partially off-set by an
increase in equipment rental revenues due to the increase in digital subscriber
counts discussed above and migration to digital signal delivery.

Homes passed increased approximately 700 to 201,100 at September 30, 2003 as
compared to June 30, 2003 primarily due to system buildouts in areas that were
not previously served and a continuing review of homes passed in the system
acquired from Rogers American Cablesystems, Inc.

Cable programming services revenues have historically been highest in the winter
months because consumers spend more time at home and tend to watch more
television during these months.

The cable services segment's share of cable modem revenue (offered through our
Internet services segment) increased 1.3% to $2.7 million in third quarter due
to an increased number of cable modems deployed. The decreased rate of growth in
the cable services segment's share of cable modem revenue in spite of the growth
in cable modem subscribers in the third quarter (as discussed in the Internet
Services Segment Revenues and Cost of Sales and Services section below) is due
to our promotional offer of one to two months of free cable modem service.

Cable services cost of sales and services increased 3.6% to $6.6 million in the
third quarter as compared to the second quarter. Cable services cost of sales
and services as a percentage of cable services segment revenues increased from
26.7% in the second quarter to 27.9% in the third quarter. The increase is due
in part to a $182,000 favorable adjustment to cable services cost of sales and
services after completion of audits by certain cable programming service vendors
in the second quarter.

Local Access Services Segment Revenues and Cost of Sales and Services
Local access services segment revenues increased 3.2% in the third quarter to
$9.5 million primarily due to increased lines in service in the third quarter
and a reimbursement from Universal Service Fund ("USF") in the third quarter
related to a prior period. At September 30, 2003 an estimated 103,400 lines were
in service as compared to approximately 101,900 lines in service at June 30,
2003.


                                       45
<PAGE>
Local access services segment cost of sales and services increased $70,000 to
$5.9 million in the third quarter. Local access services segment cost of sales
and services as a percentage of local access services segment revenues decreased
from 63.4% in the second quarter to 62.2% in the third quarter. The decrease in
cost of sales and services as a percentage of local access services segment
revenues is primarily due to a reimbursement from USF in the third quarter
related to a prior period. The decrease is partially off-set by decreased
network access services revenues from other carriers as the number of customers
purchasing both long-distance and local access services from us increases.

The local access services segment operating results are negatively effected by
the allocation of the benefit of access cost savings to the long-distance
services segment. If the local access services segment received credit for the
access charge reductions recorded by the long distance services segment, the
local access services segment operating results would have improved by
approximately $1.6 million and the long distance services segment operating
results would have been reduced by an equal amount in the third quarter. Avoided
access charges totaled approximately $1.7 million in the second quarter.

Internet Services Segment Revenues and Cost of Sales and Services
Total Internet services segment revenues increased $132,000 to $4.9 million in
the third quarter primarily due to the $70,000 increase in Internet services
segment's allocable share of cable modem revenues to $2.3 million in the third
quarter as compared to the second quarter. The increase in cable modem revenues
is primarily due to growth in the number of cable modems deployed. Cable modem
subscribers increased from approximately 40,500 at June 30, 2003 to
approximately 42,800 at September 30, 2003. The growth in cable modem
subscribers in third quarter without proportional growth in cable modem revenue
is primarily due to our promotional offer of one to two months of free service.

At September 30, 2003 we had 93,900 total Internet subscribers, which includes
51,100 dial-up subscribers and 42,800 cable modem subscribers. At June 30, 2003
we had 92,200 total Internet subscribers, which included 51,700 dial-up
subscribers and 40,500 cable modem subscribers. Our total dial-up subscribers
decreased 600 to 51,100 subscribers at September 30, 2003 as compared to June
30, 2003 as more customers continue to migrate to cable modems.

Internet services cost of sales and services increased $89,000 in the third
quarter to $1.5 million, and as a percentage of Internet services revenues,
totaled 30.7% and 29.7% in the third and second quarters, respectively.

All Other Revenues and Costs of Sales and Services
All Other revenues increased $512,000 to $7.0 million in the third quarter
primarily due to the recognition of $400,000 in special project revenue from a
certain customer in the third quarter.

All Other costs of sales increased $51,000 to $3.4 million in the third quarter,
and as a percentage of All Other revenues, totaled 49.3% and 52.5% in the third
and second quarters, respectively. The decrease in All Other costs of sales and
services as a percentage of All Other revenues is primarily due to the
recognition of $400,000 in special project revenue in the third quarter without
a corresponding increase in costs of sales or services. The decrease in All
Other costs of sales and services as a percentage of All Other revenues is
partially off-set by a $140,000 favorable adjustment in the second quarter due
to a revision of an estimate of a previously unbilled cost of sales and service
upon receipt of the invoice.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 2.8% to $35.3 million in
the third quarter as compared to the second quarter. As a percentage of
revenues, selling, general and administrative expenses were 35.9% and 35.8% in
the third and second quarters, respectively. The increase in selling, general
and administrative


                                       46
<PAGE>
expenses is primarily due to costs associated with Alaska regulatory affairs and
the purchase of Alaska Airline miles due to the implementation of our Alaska
Airlines miles program in 2003. The increase in selling, general and
administrative expenses is partially off-set by decreased health insurance
costs.

Bad Debt Expense
Bad debt expense decreased $269,000 to $533,000 in the third quarter as compared
to the second quarter. As a percentage of total revenues, third and second
quarter bad expense was 0.5% and 0.8%, respectively. The decrease in the third
quarter is primarily due to the recognition of approximately $647,000 of the MCI
credit as a reduction to bad debt expense in third quarter, as further discussed
in the Long Distance Service Overview included in Part I, Item 2 of this report.

The decrease in bad debt expense described above is partially off-set by
recognition of a $550,000 bad debt reserve for uncollected amounts due from a
certain customer in the third quarter.

Depreciation, Amortization and Accretion Expense
Depreciation, amortization and accretion expense increased 2.1% to $13.1 million
in third quarter as compared to second quarter due to several individually
insignificant increases in depreciation and amortization expense.

Other Expense, Net
Other expense, net of other income, decreased $284,000 in the third quarter to
$9.3 million due primarily to the capitalization of $128,000 in interest cost
associated with the commencement of construction of a fiber optic cable system
connecting Seward, Alaska and Warrenton, Oregon.

Net Income
We reported net income of $4.5 million for the third quarter as compared to net
income of $4.8 million for the second quarter. The decrease is primarily due to
increased costs of sales and services due to a decreased refund in the long
distance services segment and decreased favorable cost of sales and services
adjustments in the long distance and cable services segments and All Other
Services in the third quarter, as previously described.

Liquidity and Capital Resources
Cash flows from operating activities totaled $49.4 million in the nine months
ended September 30, 2003 ("2003") as compared to $47.6 million in the nine
months ended September 30, 2002 ("2002"). The increase in 2003 is primarily due
to increased cash flow in 2003 from all of our reportable segments, a $2.3
million refund from a local exchange carrier in respect of its earnings that
exceeded regulatory requirements, and a $1.3 million refund from an intrastate
access cost pool that previously overcharged us for access services. Uses of
cash during 2003 included $34.4 million of expenditures for property and
equipment, including construction in progress, principal payments on long-term
debt and capital lease obligations of $9.1 million, payment of $3.2 million in
deposits, and payment of $2.6 million in fees associated with the original and
amended Senior Facility.

Net receivables increased $8.1 million from December 31, 2002 to September 30,
2003 primarily due to an increase in:

     o   Trade receivables for broadband services provided to hospitals and
         health clinics, and
     o   Trade receivables for telecommunication services provided to a certain
         customer. The accounts receivable for this customer was subsequently
         paid in October 2003.

Working capital deficit totaled ($9.8) million at September 30, 2003, a $9.4
million decrease as compared to a deficit of ($450,000) at December 31, 2002.
The decrease is primarily attributed to classification of $20.0


                                       47
<PAGE>
million of our Senior Facility as current maturities of long-term debt as of
September 30, 2003, following the April 22, 2003 amendment.

The decrease in working capital was partially off-set by:

     o   A $8.1 million increase in net receivables at September 30, 2003 as
         compared to December 31, 2002 as previously described, and
     o   A $5.0 million decrease in accrued interest at September 30, 2003 as
         compared to December 31, 2002 due to the semi-annual $8.8 million
         Senior Notes interest payment in August 2003.

On October 30, 2003 we closed a $220.0 million new Senior Facility to replace
the April 22, 2003 amended Senior Facility. The new Senior Facility reduces the
interest rate from LIBOR plus 6.50% to LIBOR plus 3.25%. The new Senior Facility
includes a term loan of $170.0 million and a revolving credit facility of $50.0
million.

The repayment schedule for the term loan portion of the new Senior Facility is
unchanged from that in the April 22, 2003 amended Senior Facility, as follows
(amounts in thousands):

                       Date                          Amount
     -----------------------------------------     -----------
     Quarterly from December 31, 2003 to
       December 31, 2004                          $   5,000
     Quarterly from March 31, 2005 to December
       31, 2005                                   $   6,000
     Quarterly from March 31, 2006 to December
       31, 2006                                   $   8,000
     Quarterly from March 31, 2007 to
       September 30, 2007                         $  10,000

The remaining balance of the Senior Facility will be payable in full on October
31, 2007.
<TABLE>
We are required to pay a commitment fee on the unused portion of the commitment
as follows:
<CAPTION>
                                      Commitment fee if the outstanding            Commitment fee if the outstanding
                                      revolving credit facility is > 50%             revolving credit facility is
                                       of the average revolving credit              < 50% of the average revolving
             Total Leverage              facility commitments by the              credit facility commitments by the
           Ratio (as defined)       lenders during such during such period           lenders during such period
          ---------------------    ----------------------------------------    ----------------------------------------
          <S>                                      <C>                                         <C>
          >3.75                                    1.00%                                       1.25%
          -
          >3.25 but <3.75                          0.75%                                       1.00%
          -
          >2.75 but <3.25                          0.50%                                       0.75%
          -
          < 2.75                                   0.50%                                       0.75%
</TABLE>


                                       48
<PAGE>
We may not permit the Total Leverage Ratio (as defined) to exceed:

                           Period                          Total Leverage Ratio
          ---------------------------------------------   ---------------------
          October 30, 2003 through December 30, 2003              4.25:1
          December 31, 2003 through December 30, 2004             4.00:1
          December 31, 2004 through December 30, 2005             3.75:1
          December 31, 2005 through June 29, 2006                 3.50:1
          June 30, 2006 through June 29, 2007                     3.25:1
          June 30, 2007 through September 29, 2007                3.00:1
          September 30, 2007 through October 31, 2007             2.75:1

We may not permit the Senior Secured Leverage Ratio (as defined) to exceed:

                                                             Senior Secured
                           Period                            Leverage Ratio
          ---------------------------------------------     ----------------
          October 30, 2003 through December 30, 2004              2.00:1
          December 31, 2004 through September 29, 2006            1.75:1
          September 30, 2006 through June 29, 2007                1.50:1
          June 30, 2007 through September 29, 2007                1.25:1
          September 30, 2007 through October 31, 2007             1.00:1

The Interest Coverage Ratio (as defined) may not be less than 2.50:1 at any
time.

Capital expenditures, excluding up to $58.0 million incurred to build or acquire
additional fiber optic cable system capacity between Alaska and the lower
forty-eight states, in any of the years ended December 31, 2003, 2004, 2005 and
2006 may not exceed:

     o   $25.0 million, plus
     o   100% of any Excess Cash Flow (as defined) during the applicable period
         less certain permitted investments during the applicable period.

If the revolving credit facility exceeds $25.0 million, we may not incur capital
expenditures, other than those incurred to build or acquire additional fiber
optic cable system capacity, in excess of $25.0 million.

Under the new Senior Facility we must either have repaid in full or successfully
refinanced our Senior Notes by February 1, 2007.

$3.5 million of the new Senior Facility has been used to provide a letter of
credit to secure payment for our contract for the design, engineering,
manufacture and installation of the undersea fiber optic cable system. The
letter of credit will be reduced to $1.8 million after a contract payment
estimated to be made in March 2004. The letter of credit will be cancelled after
the final contract payment date estimated to be in April 2004.

In connection with the April 22, 2003 amended Senior Facility, we paid bank fees
and other expenses of approximately $2.6 million during the nine months ended
September 30, 2003. Deferred Loan Costs, Net for the Senior Facility which
closed on November 1, 2002 and the April 22, 2003 amended Senior Facility
totaled $7.2 million at October 30, 2003, the date we closed the new Senior
Facility.

Because a portion of the new Senior Facility is a substantial modification of
the April 22, 2003 amended Senior Facility we will recognize approximately $5.0
million in Amortization of Loan and Senior Notes Fees


                                       49
<PAGE>
during the three months ended December 31, 2003. The remaining $2.2 million in
Deferred Loan Costs, Net will continue to be amortized over the life of the new
Senior Facility.

In connection with the new Senior Facility, we paid bank fees and other expenses
of $850,000 in October 2003 which will be amortized over the life of the new
agreement.

The term loan is fully drawn and we have letters of credit totaling $6.5
million, which leaves $43.5 million available at September 30, 2003 to draw
under the revolving credit facility if needed. In April 2003, we made a $2.7
million principal payment on the revolving credit facility.

We were in compliance with all loan covenants at September 30, 2003.

Our semi-annual Senior Notes interest payment of $8.8 million was paid in
February and again in August 2003 out of existing cash balances. Our next Senior
Notes interest payment of $8.8 million is due February 1, 2004.

Our expenditures for property and equipment, including construction in progress,
totaled $34.4 million and $52.0 million during the nine months ended September
30, 2003 and 2002, respectively. Our capital expenditures requirements are
largely success driven and are a result of the progress we are making in the
marketplace. We expect our 2003 expenditures for property and equipment for our
core operations, including construction in progress and excluding the new fiber
system construction costs described below, to total $40 million to $50 million,
depending on available opportunities and the amount of cash flow we generate
during 2003.

We have begun work on the construction of a fiber optic cable system connecting
Seward, Alaska and Warrenton, Oregon, with leased backhaul facilities to connect
it to our switching and distribution centers in Anchorage, Alaska and Seattle,
Washington. The 1,544-statute mile cable has a total design capacity of 960
Gigabits per second access speed and is planned to be operational by May 2004.
The cable will complement our existing fiber optic cable between Whittier,
Alaska and Seattle, Washington. The two cables will provide physically diverse
backup to each other in the event of an outage. We expect to fund construction
costs that are expected to total $50 million through our operating cash flows
and, to the extent necessary, with draws on our new Senior Facility. During the
nine month period ended September 30, 2003 our capital expenditures for this
project have totaled approximately $4.8 million, all of which has been funded
through our operating cash flows.

Planned capital expenditures over the next five years include those necessary
for continued expansion of our long-distance, local exchange and Internet
facilities, supplementing our existing network backup facilities, continuing
development of our Personal Communication Services, or PCS, network, digital
local phone service, and upgrades to our cable television plant.

The financial, credit and economic impacts of MCI's July 2002 bankruptcy filing
on the industry in general and on us in particular are not yet fully understood
and are not predictable. See Long Distance Overview for a discussion of the
settlement of the uncollected amounts due from MCI.

We believe that payment for services provided to MCI subsequent to their
bankruptcy filing date will continue to be made timely, consistent with our
status in MCI's filing as a key service provider or utility to MCI.

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


                                       50
<PAGE>
The long-distance, local access, cable, Internet and wireless services
industries continue to experience substantial competition, regulatory
uncertainty, and continuing technological changes. Our future results of
operations will be affected by our ability to react to changes in the
competitive and regulatory environment and by our ability to fund and implement
new or enhanced technologies. We are unable to determine how competition,
economic conditions, and regulatory and technological changes will affect our
ability to obtain financing.

The telecommunications industry in general is depressed due to high levels of
competition in the long-distance market resulting in pressures to reduce prices,
an oversupply of long-haul capacity, excessive debt loads, several high-profile
company failures and potentially fraudulent accounting practices by some
companies. Our ability to obtain new debt under acceptable terms and conditions
in the future may be diminished as a result.

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

Critical Accounting Policies
Our accounting and reporting policies comply with accounting principles
generally accepted in the United States of America. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions. The financial position and results
of operations can be affected by these estimates and assumptions, which are
integral to understanding reported results. Critical accounting policies are
those policies that management believes are the most important to the portrayal
of the Company's financial condition and results, and require management to make
estimates that are difficult, subjective or complex. Most accounting policies
are not considered by management to be critical accounting policies. Several
factors are considered in determining whether or not a policy is critical in the
preparation of financial statements. These factors include, among other things,
whether the estimates are significant to the financial statements, the nature of
the estimates, the ability to readily validate the estimates with other
information including third parties or available prices, and sensitivity of the
estimates to changes in economic conditions and whether alternative accounting
methods may be utilized under accounting principles generally accepted in the
United States of America. For all of these policies, management cautions that
future events rarely develop exactly as forecast, and the best estimates
routinely require adjustment. Management has discussed the development and the
selection of critical accounting policies with GCI's Audit Committee.

 Those policies considered to be critical accounting policies for the three and
nine months ended September 30, 2003 are described below.

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


                                       51
<PAGE>
     o   We record all assets and liabilities acquired in purchase acquisitions,
         including goodwill and other intangibles, at fair value as required by
         SFAS 141. Goodwill and indefinite-lived assets such as our cable
         segment franchise agreements are no longer amortized but are subject,
         at a minimum, to annual tests for impairment. Other intangible assets
         are amortized over their estimated useful lives using the straight-line
         method, and are subject to impairment if events or circumstances
         indicate a possible inability to realize the carrying amount. The
         initial goodwill and other intangibles recorded and subsequent
         impairment analysis requires management to make subjective judgments
         concerning estimates of how the acquired asset will perform in the
         future using a discounted cash flow analysis. Additionally, estimated
         cash flows may extend beyond ten years and, by their nature, are
         difficult to determine over an extended timeframe. Events and factors
         that may significantly affect the estimates include, among others,
         competitive forces, customer behaviors and attrition, changes in
         revenue growth trends, cost structures and technology, and changes in
         discount rates, performance compared to peers, material and ongoing
         negative economic trends, and specific industry or market sector
         conditions. In determining the reasonableness of cash flow estimates,
         we review historical performance of the underlying asset or similar
         assets in an effort to improve assumptions utilized in our estimates.
         In assessing the fair value of reportable operating segments, we may
         consider other information to validate the reasonableness of our
         valuations including public market comparables, multiples of recent
         mergers and acquisitions of similar businesses and third-party
         assessments. These evaluations could result in a change in useful lives
         in future periods and could result in write-down of the value of
         intangible assets. Because of the significance of the identified
         intangible assets and goodwill to our consolidated balance sheet, the
         annual impairment analysis will be critical. Any changes in key
         assumptions about the business and its prospects, or changes in market
         conditions or other externalities, could result in an impairment charge
         and such a charge could have a material adverse effect on our
         consolidated financial condition and results of operations. Refer to
         Note 3 in the accompanying Notes to Interim Condensed Consolidated
         Financial Statements for additional information regarding intangible
         assets.

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

     o   GCI, Inc., as a wholly owned subsidiary and member of the GCI
         controlled group of corporations, files its income tax returns as part
         of the consolidated group of corporations under GCI. Accordingly, the
         following discussion reflects the consolidated group's activity and
         balances. Our income tax policy provides for deferred income taxes to
         show the effect of temporary differences between the recognition of
         revenue and expenses for financial and income tax reporting purposes
         and between the tax basis of assets and liabilities and their reported
         amounts in the financial statements in accordance with SFAS No. 109,
         "Accounting for Income Taxes." We have recorded deferred tax assets of
         approximately $80.7 million associated with income tax net operating
         losses that were generated from 1990 to 2003, and that expire from 2005
         to 2022. Pre-acquisition income tax net operating losses associated
         with acquired companies are subject to additional deductibility limits.
         We have recorded deferred tax assets of approximately $1.9 million
         associated with alternative minimum tax credits that do not expire.
         Significant management judgment is required in developing our provision
         for income taxes, including the determination of deferred tax assets
         and liabilities and any valuation allowances that may be required
         against the deferred tax assets. In conjunction with


                                       52
<PAGE>
         certain 1996 acquisitions, we determined that approximately $20 million
         of the acquired net operating losses would not be utilized for income
         tax purposes, and elected with our December 31, 1996 income tax returns
         to forego utilization of such acquired losses. Deferred tax assets were
         not recorded associated with the foregone losses and, accordingly, no
         valuation allowance was provided. We have not recorded a valuation
         allowance on the deferred tax assets as of September 30, 2003 based on
         management's belief that future reversals of existing taxable temporary
         differences and estimated future taxable income exclusive of reversing
         temporary differences and carryforwards, will, more likely than not, be
         sufficient to realize the benefit of these assets over time. In the
         event that actual results differ from these estimates or if our
         historical trends change, we may be required to record a valuation
         allowance on deferred tax assets, which could have a material adverse
         effect on our consolidated financial condition and results of
         operations.

Other significant accounting policies, not involving the same level of
measurement uncertainties as those discussed above, are nevertheless important
to an understanding of the financial statements. Polices related to revenue
recognition and financial instruments require difficult judgments on complex
matters that are often subject to multiple sources of authoritative guidance.
Certain of these matters, including but not limited to the requirement to
account for the market value of stock options as compensation expense, are among
topics currently under reexamination by accounting standards setters and
regulators. Although no specific conclusions reached by these standard setters
appear likely to cause a material change in our accounting policies, outcomes
cannot be predicted with confidence. A complete discussion of our significant
accounting policies can be found in Note 1 in the Notes to Consolidated
Financial Statements included in our December 31, 2002 Form 10-K. A condensed
discussion of our significant accounting policies can be found in Note 1 in the
accompanying Notes to Interim Condensed Consolidated Financial Statements.

Geographic Concentration and the Alaska Economy
We offer voice and data telecommunication and video services to customers
primarily throughout Alaska. Because of this geographic concentration, growth of
our business and of our operations depends upon economic conditions in Alaska.
The economy of Alaska is dependent upon the natural resource industries, and in
particular oil production, as well as investment earnings, tourism, government,
and United States military spending. Any deterioration in these markets could
have an adverse impact on us. All of the federal funding is dedicated for
specific purposes, leaving oil revenues as the primary source of general
operating revenues. In fiscal 2003 the State's actual results indicate that
Alaska's general operating revenues and federal funding supplied 37% and 45%,
respectively, of the state's total revenues. In fiscal 2004 state economists
forecast that Alaska's general operating revenues and federal funding will
supply 33% and 45%, respectively, of the state's total projected revenues.

The volume of oil transported by the TransAlaska Oil Pipeline System over the
past 20 years has been as high as 2.0 million barrels per day in fiscal 1988.
Production has been declining over the last several years with an average of
0.990 million barrels produced per day in fiscal 2003. The state forecasts a
production rate slightly above 1.0 million barrels per day starting in fiscal
2009. The state attributes the production rate increase to future development of
recent discoveries in the National Petroleum Reserve Alaska and other new
fields.

Market prices for North Slope oil averaged $28.15 in fiscal 2003 and are
forecasted to average $25.28 in fiscal 2004. The closing price per barrel was
$28.38 on October 21, 2003. To the extent that actual oil prices vary materially
from the state's projected prices the state's projected revenues and deficits
will change. Every $1 change in the price of oil results in a $50.0 to $60.0
million change in the state's revenue. The production policy of the Organization
of Petroleum Exporting Countries and its ability to continue to act in concert
represents a key uncertainty in the state's revenue forecast.


                                       53
<PAGE>
The State of Alaska maintains the Constitutional Budget Reserve Fund that is
intended to fund budgetary shortfalls. If the state's current projections are
realized, the Constitutional Budget Reserve Fund will be depleted in 2006. The
date the Constitutional Budget Reserve Fund is depleted is highly influenced by
the price of oil. If the fund is depleted, aggressive state action will be
necessary to increase revenues and reduce spending in order to balance the
budget. The governor of the State of Alaska and the Alaska legislature continue
to pursue cost cutting and revenue enhancing measures. Through a combination of
revenue enhancements and reductions in spending the governor of the State of
Alaska and the State legislature approved a fiscal 2004 budget which is
projected to spend approximately $479 million of the Constitutional Budget
Reserve Fund.

In 2003 the Alaska Legislature passed and the Governor signed legislation that
extended the life of the RCA until 2007.

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

Should new oil discoveries or developments not materialize or the price of oil
become depressed, the long term trend of continued decline in oil production
from the Prudhoe Bay area is inevitable with a corresponding adverse impact on
the economy of the state, in general, and on demand for telecommunications and
cable television services, and, therefore, on us, in particular. In the past
year, there has been a renewed effort to allow exploration and development in
the Arctic National Wildlife Refuge ("ANWR"). The U.S. Energy Information Agency
estimates it could take nine years to begin oil field drilling after approval of
ANWR exploration.

Deployment of a natural gas pipeline from the State of Alaska's North Slope to
the Lower 48 States has been proposed to supplement natural gas supplies. A
competing natural gas pipeline through Canada has also been proposed. The
economic viability of a natural gas pipeline depends upon the price of and
demand for natural gas. Either project could have a positive impact on the State
of Alaska's revenues and the Alaska economy. According to their public comments,
neither Exxon Mobil, BP nor Conoco Phillips, Alaska's large natural gas owners,
believe either natural gas pipeline makes financial sense based upon their
preliminary analysis, though BP and Conoco Phillips have proposed certain
federal income tax incentives that would take effect if the price for Alaska
natural gas goes below a certain level. The governor of the State of Alaska and
certain natural gas transportation companies continue to support a natural gas
pipeline from Alaska's North Slope by trying to reduce the project's costs and
by advocating for federal tax incentives to further reduce the project's costs.
Federal income tax incentives may be included in energy legislation which is
being debated by the U.S. House and Senate.

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

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


                                       54
<PAGE>
We have, since our entry into the telecommunication marketplace, aggressively
marketed our services to seek a larger share of the available market. The
customer base in Alaska is limited, however, with a population of approximately
644,000 people. The State of Alaska's population is distributed as follows:

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

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

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

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

Inflation
We do not believe that inflation has a significant effect on our operations.

Schedule of Certain Known Contractual Obligations
<TABLE>
The following table details future projected payments associated with our
certain known contractual obligations as of December 31, 2002, the date of our
most recent fiscal year-end balance sheet. Our schedule of certain known
contractual obligations has been updated to reflect our new Senior Facility and
to include certain purchase obligations.
<CAPTION>
                                                               Payments Due by Period
                                                         Less than 1   1 to 3      4 to 5   More Than 5
                                                Total        Year       Years       Years      Years
                                            ------------ ----------- ---------- ----------- ------------
                                                               (Amounts in thousands)
   <S>                                     <C>              <C>        <C>         <C>         <C>
   Long-term debt                          $   357,700      15,000      47,000     295,700        ---
   Interest on long-term debt                   87,750      17,550      35,100      35,100        ---
   Capital lease obligations, including
     interest                                   68,943       5,115      19,845      18,536     25,447
   Operating lease commitments                  67,673      11,780      18,607      12,878     24,408
   Purchase obligations                         53,574      22,704      23,170       5,775      1,925
                                            ------------ ----------- ---------- ----------- ------------
     Total contractual obligations         $   635,640      72,149     143,722     367,989     51,780
                                            ============ =========== ========== =========== ============
</TABLE>

                                       55
<PAGE>
Purchase obligations include our fiber optic cable system construction
commitment of $35.4 million as further described in note 7 to the Notes to
Interim Condensed Consolidated Financial Statements included in Part I, Item 1
of this report. The contract associated with this commitment is non-cancelable.

For long-term debt included in the above table, we have included principal
payments on our new Senior Facility and on our Senior Notes. Interest on amounts
outstanding under our new Senior Facility is based on variable rates and
therefore the amount is not determinable. Our Senior Notes require semi-annual
interest payments of approximately $8.78 million through 2007. For a discussion
of our long-term debt, see notes 5 and 8 to the Notes to Consolidated Financial
Statements included in Part II of our December 31, 2002 Form 10-K.

For a discussion of our capital and operating leases, see note 12 to the Notes
to Consolidated Financial Statements included in Part II of our December 31,
2002 Form 10-K.

Audit Committee
GCI's Audit Committee, composed entirely of independent directors, meets
periodically with our independent auditors and management to review the
Company's financial statements and the results of audit activities. The Audit
Committee, in turn, reports to the GCI Board of Directors on the results of its
review and recommends the selection of independent auditors.

The Audit Committee has approved the independent auditor to provide the
following services:

     o   Audit (audit of financial statements filed with the SEC, quarterly
         reviews, comfort letters, consents, review of registration statements,
         accounting consultations); and

     o   Audit-related (employee benefit plan audits and accounting consultation
         on proposed transactions).


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

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

Our new Senior Facility carries interest rate risk. Amounts borrowed under this
Agreement bear interest at Libor plus 3.25%. Should the Libor rate change, our
interest expense will increase or decrease accordingly. On September 21, 2001,
we entered into an interest rate swap agreement to convert $25.0 million of
variable interest rate debt to 3.98% fixed rate debt plus applicable margin. As
of September 30, 2003, we have borrowed $170.0 million of which $145.0 million
is subject to interest rate risk. On this amount, a 1% increase in the interest
rate would result in $1,450,000 in additional gross interest cost on an
annualized basis.

Our Satellite Transponder Capital Lease carries interest rate risk. Amounts
borrowed under this Agreement bear interest at Libor plus 3.25%. Should the
Libor rate change, our interest expense will increase or decrease accordingly.
As of September 30, 2003, we have borrowed $43.8 million subject to interest
rate risk. On this amount, a 1% increase in the interest rate would result in
$438,000 in additional gross interest cost on an annualized basis.


                                       56
<PAGE>
PART I.
ITEM 4.
                             Controls and Procedures

Evaluation of disclosure controls and procedures
Within the 90 days prior to the date of this report, we carried out an
evaluation of the effectiveness of the design and operation of our "disclosure
controls and procedures" (as defined in the Securities Exchange Act of 1934
("Exchange Act") Rules 13a-14(c) and 15d-14(c)) under the supervision and with
the participation of our management, including our Chief Executive Officer and
our Chief Financial Officer. Based upon that evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures are effective.

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

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

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

PART II.   OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS

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


                                       57
<PAGE>
PART II.
ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a) Exhibits -
<TABLE>
<CAPTION>
                       Exhibit No.                                        Description
                    -----------------------------------------------------------------------------------------------------
                        <S>           <C>
                        10.111        Credit, Guaranty, Security and Pledge Agreement between GCI Holdings, Inc. and
                                        Credit Lyonnais New York Branch as Administrative Agent, Issuing Bank,
                                        Co-Bookrunner and Co-Arranger, General Electric Capital Corporation as
                                        Documentation Agent, Co-Arranger and Co-Bookrunner and CIT Lending Services
                                        Corporation as Syndication Agent, dated as of October 30, 2003
                        31            Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                                        302 of the Sarbanes-Oxley Act of 2002
                        32            Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                                        906 of the Sarbanes-Oxley Act of 2002
</TABLE>
           (b) Reports on Form 8-K filed during the quarter ended September
               30, 2003 - None


                                       58
<PAGE>
                                   SIGNATURES


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



                                                GCI, INC.

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

/s/                                         President and Director                           November 7, 2003
--------------------------------------      (Principal Executive Officer)                 ----------------------
Ronald A. Duncan

/s/                                         Vice President and Director                      November 7, 2003
--------------------------------------                                                    ----------------------
G. Wilson Hughes

/s/                                         Secretary, Treasurer and Director                November 7, 2003
--------------------------------------      (Principal Financial and Accounting           ----------------------
John M. Lowber                              Officer)
</TABLE>


                                       59