As filed with the Securities and Exchange Commission on August 14, 2001.

                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 June 30, 2001

                                       OR

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

         For the transition period from        to

                           Commission File No. 0-5890

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


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

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

       Registrant's telephone number, including area code: (907) 265-5600


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

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

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

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


                                       1
<PAGE>
<TABLE>
                                      INDEX

                                    GCI, INC.
            A WHOLLY OWNED SUBSIDIARY OF GENERAL COMMUNICATION, INC.

                                    FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 2001
<CAPTION>

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

PART I.  FINANCIAL INFORMATION

         Item l.    Consolidated Balance Sheets as of June 30, 2001
                       (unaudited) and December 31, 2000..................................................5

                    Consolidated Statements of Operations for the
                       three and six months ended June 30, 2001
                       (unaudited) and 2000 (unaudited)...................................................7

                    Consolidated Statements of Stockholder's Equity
                       for the six months ended June 30, 2001
                       (unaudited) and 2000 (unaudited)...................................................8

                    Consolidated Statements of Cash Flows for the six
                       months ended June 30, 2001 (unaudited)
                       and 2000 (unaudited)...............................................................9

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

         Item 2.    Management's Discussion and Analysis of Financial
                    Condition and Results of Operations...................................................16

         Item 3.    Quantitative and Qualitative Disclosures About
                    Market Risk...........................................................................30

PART II.  OTHER INFORMATION

         Item 1.    Legal Proceedings.....................................................................31

         Item 6.    Exhibits and Reports on Form 8-K......................................................31

         Other items are omitted, as they are not applicable.

SIGNATURES................................................................................................32
</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. In this Quarterly Report, in
addition to historical information, we state 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," or "continue" or the negative of those
words and other comparable words. You should be aware that those statements are
only our predictions and are subject to risks and uncertainties. Actual events
or results may differ materially. 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 Private Securities
Litigation Reform Act of 1995.

   - Material adverse changes in the economic conditions in the markets we serve
     and in general economic conditions;
   - The efficacy of the rules and regulations to be adopted by the Federal
     Communications Commission ("FCC") and state public regulatory agencies to
     implement the provisions of the Telecommunications Act of 1996; the outcome
     of litigation relative thereto; and the impact of regulatory changes
     relating to access reform;
   - 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 local, cable and Internet services; the extent and pace at which
     different competitive environments develop for each segment of our
     business; the extent and duration for which competitors from each segment
     of the telecommunications industry are able to offer combined or full
     service packages prior to our being able to do so; the degree to which we
     experience material competitive impacts to our traditional service
     offerings prior to achieving adequate local service entry; and competitor
     responses to our products and services and overall market acceptance of
     such products and services;
   - The outcome of our negotiations with Incumbent Local Exchange Carriers
     ("ILECs") and state regulatory arbitrations and approvals with respect to
     interconnection agreements; and our ability to purchase unbundled network
     elements or wholesale services from ILECs at a price sufficient to permit
     the profitable offering of local exchange service at competitive rates;
   - Success and market acceptance for new initiatives, many of which are
     untested; the level and timing of the growth and profitability of new
     initiatives, particularly local access services expansion, Internet
     (consumer and business) services expansion and wireless services; start-up
     costs associated with entering new markets, including advertising and
     promotional efforts; successful deployment of new systems and applications
     to support new initiatives; and local conditions and obstacles;
   - Uncertainties inherent in new business strategies, new product launches and
     development plans, including local access services, Internet services,
     wireless services, digital video services, cable modem services, digital
     subscriber line services, and transmission services;
   - Rapid technological changes;
   - Development and financing of telecommunication, local access, wireless,
     Internet and cable networks and services;
   - Future financial performance, including the availability, terms and
     deployment of capital; the impact of regulatory and competitive
     developments on capital outlays, and the ability to achieve cost savings
     and realize productivity improvements;
   - Availability of qualified personnel;

                                       3
<PAGE>
   - Changes in, or failure, or inability, to comply with, government
     regulations, including, without limitation, regulations of the FCC, the
     Regulatory Commission of Alaska, and adverse outcomes from regulatory
     proceedings;
   - Uncertainties in federal military spending levels and military base
     closures in markets in which we operate;
   - Industry consolidation and mergers;
   - Other risks detailed from time to time in our periodic reports filed with
     the Securities and Exchange Commission.

These forward-looking statements (and such risks, uncertainties and other
factors) are made only as of the date of this report and we expressly disclaim
any obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained in this document 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. Readers are cautioned not to put undue reliance on such
forward-looking statements.

                                      4
<PAGE>
PART I.  FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
                                          GCI, INC. AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                                                 (Unaudited)
                                                                                   June 30,      December 31,
                            ASSETS                                                   2001            2000
---------------------------------------------------------------------------    --------------- ----------------
                                                                                    (Amounts in thousands)
<S>                                                                          <C>                    <C>
Current assets:
    Cash and cash equivalents                                                $       4,583            5,962
                                                                               --------------- ----------------
    Receivables:
        Trade                                                                       57,063           49,872
        Employee and other                                                             693              378
                                                                               --------------- ----------------
                                                                                    57,756           50,250
        Less allowance for doubtful receivables                                      4,715            2,864
                                                                               --------------- ----------------
           Net receivables                                                          53,041           47,386
                                                                               --------------- ----------------

    Prepaid and other current assets                                                 2,479            2,505
    Deferred income taxes, net                                                       4,664            3,221
    Inventories                                                                      4,736            5,717
    Property held for sale                                                             ---           10,877
    Notes receivable with related parties                                              264              241
                                                                               --------------- ----------------
           Total current assets                                                     69,767           75,909
                                                                               --------------- ----------------

Property and equipment in service, net of depreciation                             375,434          347,802
Construction in progress                                                             7,349            8,097
                                                                               --------------- ----------------
           Net property and equipment                                              382,783          355,899
                                                                               --------------- ----------------

Cable franchise agreements, net of amortization of $24,095,000 and
   $21,509,000 at June 30, 2001 and December 31, 2000, respectively                182,799          184,983
Goodwill, net of amortization of $6,583,000 and $5,952,000 at June 30,
   2001 and December 31, 2000, respectively                                         39,196           40,002
Other intangible assets, net of amortization of $951,000 and $729,000 at
   June 30, 2001 and December 31, 2000, respectively                                 4,126            3,936
Property held for sale                                                               1,555            1,550
Deferred loan and senior notes costs, net of amortization of $4,857,000
   and $4,166,000 at June 30, 2001 and December 31, 2000, respectively               7,792            8,402
Notes receivable with related parties                                                2,722            3,235
Other assets, at cost, net of amortization of $66,000 and $63,000 at June
   30, 2001 and December 31, 2000, respectively                                      3,056            5,091
                                                                               --------------- ----------------
           Total other assets                                                      241,246          247,199
                                                                               --------------- ----------------
           Total assets                                                      $     693,796          679,007
                                                                               =============== ================

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

                                       5                             (Continued)
<PAGE>
<TABLE>
                           GCI, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)
<CAPTION>
                                                                                 (Unaudited)
                                                                                   June 30,      December 31,
             LIABILITIES AND STOCKHOLDER'S EQUITY                                    2001            2000
--------------------------------------------------------------------------    ---------------- ----------------
                                                                                    (Amounts in thousands)
<S>                                                                          <C>                    <C>
Current liabilities:
    Current maturities of obligations under capital leases                   $       1,570            1,600
    Accounts payable                                                                31,820           29,094
    Accrued payroll and payroll related obligations                                 11,309           10,385
    Deferred revenue                                                                10,509            9,477
    Accrued interest                                                                 9,681            9,256
    Accrued liabilities                                                              5,459            4,134
    Due to related party                                                             3,564            1,569
    Subscriber deposits and other current liabilities                                1,247            1,362
                                                                              ---------------- ----------------
        Total current liabilities                                                   75,159           66,877

Long-term debt, excluding current maturities                                       322,700          334,400
Obligations under capital leases, excluding current maturities                      46,105           46,882
Obligations under capital leases due to related party, excluding
  current maturities                                                                   179              214
Deferred income taxes, net of deferred income tax benefit                           24,453           22,057
Other liabilities                                                                    4,134            3,755
                                                                              ---------------- ----------------
        Total liabilities                                                          472,730          474,185
                                                                              ---------------- ----------------
Stockholder's equity:
  Class A common stock.  Authorized 10,000 shares; issued and outstanding
   100 shares at June 30, 2001 and December 31, 2000                               206,622          206,622
  Paid-in capital                                                                   43,596           29,941
  Retained deficit                                                                 (29,152)         (31,741)
                                                                              ---------------- ----------------
        Total stockholder's equity                                                 221,066          204,822
  Commitments and contingencies
                                                                              ---------------- ----------------
        Total liabilities and stockholder's equity                           $     693,796          679,007
                                                                              ================ ================
See accompanying notes to interim condensed consolidated financial statements.
</TABLE>
                                       6
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
                                                             (Unaudited)                       (Unaudited)
                                                          Three Months Ended                 Six Months Ended
                                                               June 30,                           June 30,
                                                          2001           2000               2001            2000
                                                     -------------- --------------     --------------- --------------
                                                            (Amounts in thousands, except per share amounts)
<S>                                                <C>                   <C>               <C>             <C>
Revenues                                           $      85,535         71,426            182,452         139,703

Cost of sales and services                                33,831         29,637             75,917          59,295
Selling, general and administrative expenses              29,593         25,733             57,443          50,387
Depreciation and amortization expense                     13,700         12,506             27,639          25,594
                                                     -------------- --------------     --------------- --------------
     Operating income                                      8,411          3,550             21,453           4,427
                                                     -------------- --------------     --------------- --------------

Interest expense                                           8,074          9,398             16,957          19,412
Interest income                                               99            183                262             358
                                                     -------------- --------------     --------------- --------------
     Interest expense, net                                 7,975          9,215             16,695          19,054
                                                     -------------- --------------     --------------- --------------
     Net income (loss) before income taxes                   436         (5,665)             4,758         (14,627)

Income tax (expense) benefit                                (270)         2,139             (2,169)          5,603
                                                     -------------- --------------     --------------- --------------
     Net income (loss)                             $         166         (3,526)             2,589          (9,024)
                                                     ============== ==============     =============== ==============

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

                                       7
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                                         SIX MONTHS ENDED JUNE 30, 2001 AND 2000

<CAPTION>
                                                            Shares of          Class A
(Unaudited)                                              Class A Common        Common         Paid-in          Retained
(Amounts in thousands)                                        Stock            Stock          Capital          Deficit
                                                         -----------------------------------------------------------------
<S>                                                            <C>           <C>               <C>             <C>
Balances at December, 1999                                     100           $ 206,622         25,503          (18,507)
Net loss                                                       ---                 ---            ---           (9,024)
Contribution from General Communication, Inc.                  ---                 ---          3,677              ---
                                                         -----------------------------------------------------------------
Balances at June 30, 2000                                      100           $ 206,622         29,180          (27,531)
                                                         =================================================================

Balances at December 31, 2000                                  100           $ 206,622         29,941          (31,741)
Net income                                                     ---                 ---            ---            2,589
Contribution from General Communication, Inc.                  ---                 ---         13,655              ---
                                                         -----------------------------------------------------------------
Balances at June 30, 2001                                      100           $ 206,622         43,596          (29,152)
                                                         =================================================================

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

                                       8
<PAGE>
<TABLE>
                                             GCI, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                             (Unaudited)
                                                                                           Six Months Ended
                                                                                               June 30,
                                                                                         2001           2000
                                                                                    -------------- --------------
                                                                                      (Amounts in thousands)
        <S>                                                                        <C>                <C>
        Operating activities:
          Net income (loss)                                                        $     2,589         (9,024)
            Adjustments to reconcile net income (loss) to net cash provided
              by operating activities:
                Depreciation and amortization                                           27,639         25,594
                Amortization charged to selling, general and administrative                 17            495
                Non-cash cost of sale                                                   10,877            ---
                Deferred income tax expense (benefit)                                    2,028         (5,603)
                Bad debt expense, net of write-offs                                      1,851            619
                Deferred compensation and compensatory stock options                       675            376
                Employee Stock Purchase Plan expense funded with issuance of
                  General Communication, Inc.  Class A common stock                        ---          1,391
                Write-off of capitalized interest                                          170          1,955
                Other noncash income and expense items                                      54           (160)
                Change in operating assets and liabilities                                (227)         4,217
                                                                                    -------------- --------------
                  Net cash provided by operating activities                             45,673         19,860
                                                                                    -------------- --------------
        Investing activities:
          Purchases of property and equipment                                          (28,443)       (18,873)
          Advances and billings to Kanas Telecom, Inc.                                  (5,632)           ---
          (Payment) refund of deposit                                                   (1,200)         8,806
          Purchases of property held for sale                                              ---         (1,550)
          Purchases of other assets                                                       (895)          (145)
          Notes receivable issued to related parties                                      (304)          (829)
          Payments received on notes receivable with related parties                       754            582
          Cash received upon acquisition of Kanas Telecom, Inc.                            228            ---
                                                                                    -------------- --------------
                  Net cash used by investing activities                                (35,492)       (12,009)
                                                                                    -------------- --------------
        Financing activities:
          Repayments of long-term borrowings and capital lease obligations             (12,595)       (10,280)
          Payment of debt issuance costs                                                   (81)          (128)
          Cash contribution from General Communication, Inc.                             1,116          1,432
                                                                                    -------------- --------------
                  Net cash used by financing activities                                (11,560)        (8,976)
                                                                                    -------------- --------------

                  Net decrease in cash and cash equivalents                             (1,379)        (1,125)

                  Cash and cash equivalents at beginning of period                       5,962         13,734
                                                                                    -------------- --------------
                  Cash and cash equivalents at end of period                       $     4,583         12,609
                                                                                    ============== ==============

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

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

(1)    General

       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 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:
             - Long-distance telephone service between Anchorage, Fairbanks,
               Juneau, and other communities in Alaska and the remaining United
               States and foreign countries
             - Cable television services throughout Alaska
             - Facilities-based competitive local access services in Anchorage
               and Fairbanks, Alaska
             - Internet access services
             - Termination of traffic in Alaska for certain common carriers
             - Private line services
             - Managed services to certain commercial customers
             - Broadband services, including our SchoolAccess(TM) offering to
               rural school districts and a similar offering to rural hospitals
               and health clinics
             - Sales and service of dedicated communications systems and related
               equipment
             - Private network point-to-point data and voice transmission
               services between Alaska and the western contiguous United States
             - Lease and sell 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 wholly-owned subsidiary GCI Holdings, Inc., GCI
             Holdings, Inc.'s wholly-owned subsidiaries GCI Communication Corp.,
             GCI Cable, Inc., and GCI Transport Co., Inc., GCI Holdings, Inc.'s
             85% controlling interest in GCI Fiber Communication Co., Inc., GCI
             Communication Corp.'s wholly-owned subsidiary Potter View
             Development Co., Inc., GCI Transport Co., Inc.'s wholly-owned
             subsidiaries GCI Satellite Co., Inc., GCI Fiber Co., Inc. and Fiber
             Hold Co., Inc. and GCI Fiber Co., Inc.'s and Fiber Hold Co., Inc.'s
             wholly-owned partnership Alaska United Fiber System Partnership
             ("Alaska United").

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

       (d)   Accounting for Derivative Instruments and Hedging Activities
             Effective January 1, 2001, we adopted Statement of Financial
             Accounting Standards No. 133, "Accounting for Derivative
             Instruments and Hedging Activities" ("SFAS No. 133"), as amended.
             SFAS No. 133 requires companies to record derivatives on the
             balance sheet as assets or liabilities, measured at fair value.
             Effective January 3, 2001, we entered into an interest rate swap
             agreement to convert $50 million of 9.75% fixed rate debt to a
             variable interest rate equal to the

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

             90 day Libor rate plus 334 basis points. The interest rate swap
             terms mirror the underlying fixed rate debt, except the interest
             rate swap may be called at no cost by the issuer on August 1, 2002.
             Under SFAS No. 133, the interest rate swap is accounted for as a
             fair value hedge. We entered into the transaction to take advantage
             of the decline in interest rates. As of June 30, 2001, the amount
             of change in the fair value of debt approximates the change in the
             fair value of the interest rate swap.

       (e)   Sale of Fiber Capacity
             During the first quarter of 2001 we completed a $19.5 million sale
             of long-haul capacity in the Alaska United undersea fiber optic
             cable system ("fiber capacity sale") in a cash transaction. The
             sale included both capacity within Alaska, and between Alaska and
             the lower 48 states. We used the proceeds from the fiber capacity
             sale to repay $11.7 million of the Fiber Facility debt and to fund
             capital expenditures and working capital.

             We account for the sale of fiber capacity as sales type leases if
             substantially all of the benefits and risks of ownership have been
             transferred to the purchaser. The accounting for the sale of fiber
             capacity is currently evolving and accounting guidance may become
             available in the future which could affirm our policy or require us
             to change it. If we are required to change our policy, it is likely
             the effect would be to recognize the gain from the sale of fiber
             capacity over the term the capacity is provided. Such a change
             would have a material effect on our statement of operations.

       (f)   Reclassifications
             Reclassifications have been made to the 2000 financial statements
             to make them comparable with the 2001 presentation.

       (g)   Other
             The accompanying unaudited interim condensed consolidated financial
             statements have been prepared in accordance with generally accepted
             accounting principles for interim financial information and with
             the instructions to Form 10-Q and Article 10 of Regulation S-X.
             Accordingly, they do not include all of the information and
             footnotes required by generally accepted accounting principles for
             complete financial statements. The interim condensed consolidated
             financial statements include the consolidated accounts of GCI, Inc.
             and its wholly owned subsidiaries with all significant intercompany
             transactions eliminated. In the opinion of management, all
             adjustments (consisting of normal recurring accruals) considered
             necessary for a fair presentation have been included. Operating
             results for the three and six month periods ended June 30, 2001 are
             not necessarily indicative of the results that may be expected for
             the year ended December 31, 2001. For further information, refer to
             the financial statements and footnotes thereto included in our
             annual report on Form 10-K for the year ended December 31, 2000.

                                       11                            (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>
              Six-month periods ended June 30,                                              2001          2000
                                                                                       ------------- ------------
              <S>                                                                     <C>                <C>
              (Increase) decrease in receivables                                      $   (7,503)        1,282
              Decrease in prepaid and other current assets                                   200           264
              (Increase) decrease in inventory                                               981          (743)
              Increase in accounts payable                                                 2,160           353
              Increase in accrued liabilities                                              1,849           786
              Increase in accrued payroll and payroll related obligations                    924           198
              Decrease in accrued interest                                                   425         1,271
              Increase (decrease) in subscriber deposits and other current
               liabilities                                                                  (115)          232
              Increase in deferred revenues                                                  899             7
              Increase (decrease) in components of other long-term liabilities               (47)          567
                                                                                       ------------- ------------
                                                                                      $     (227)        4,217
                                                                                       ============= ============
</TABLE>
       We paid income taxes totalling approximately $61,000 and $0 during the
       six-month periods ended June 30, 2001 and 2000, respectively.

       We paid interest totalling approximately $16,532,000 and $16,987,000
       during the six-month periods ended June 30, 2001 and 2000, respectively.

       We recorded $1,072,000 and $192,000 during the six months ended June 30,
       2001 and 2000, respectively, in paid-in capital in recognition of the
       income tax effect of excess stock compensation expense for tax purposes
       over amounts recognized for financial reporting purposes.

       During the six months ended June 30, 2000 we funded the employer matching
       portion of Employee Stock Purchase Plan contributions by GCI's issuance
       of its Class A common stock valued at $1,406,000. We purchased such
       shares on the open market during the six months ended June 30, 2001.

       We financed the purchase of satellite transponder capacity pursuant to a
       long-term capital lease arrangement with a leasing company during the six
       month period ended June 30, 2000 at a cost of $48.2 million.

       Effective June 30, 2001 we acquired from WorldCom, Inc. ("WorldCom")
       their 85% controlling interest in Kanas (see note 3) in exchange for
       $10.0 million of Series C preferred stock issued by GCI.

       Effective March 31, 2001 we acquired the assets and customer base of G.C.
       Cablevision, Inc. The seller received 238,199 unregistered shares of GCI
       Class A common stock with a future payment in additional shares
       contingent upon certain conditions.

  (3)  Acquisition of Kanas
       On June 30, 2001 we completed the acquisition of WorldCom's 85%
       controlling interest in Kanas, which owns the 800-mile fiber optic cable
       system that extends from Prudhoe Bay, Alaska to Valdez, Alaska via
       Fairbanks. On June 30, 2001 GCI issued to WorldCom, a related party,
       shares of Series C

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

       preferred stock valued at $10.0 million. The corporation owning the fiber
       optic system is operated as GCI Fiber Communication Co., Inc.

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

       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 31 communities and areas in Alaska, including the state's
         three largest urban areas, Anchorage, Fairbanks and Juneau. We offer
         digital cable television services in Anchorage and Fairbanks and retail
         cable modem service (through our Internet services segment) in
         Anchorage, Fairbanks, Juneau and Valdez. We plan to expand our product
         offerings as plant upgrades are completed in other communities in
         Alaska.

         Local access services. We offer facilities based competitive local
         exchange services in Anchorage and Fairbanks and plan to provide
         similar competitive local exchange services Juneau during 2002.

         Internet services. We offer wholesale and retail Internet services. We
         offer cable modem service in Anchorage, Fairbanks, Juneau and Valdez
         and plan to provide cable modem service in the Kenai-Soldotna area in
         2002. Our undersea fiber optic cable allows us to offer enhanced
         services with high-bandwidth requirements.

       Included in the "All Other" category in the tables that follow are our
       managed services, product sales, cellular telephone services, and
       management services for Kanas, a related party (see note 3). None of
       these business units have ever met the quantitative thresholds for
       determining reportable segments. Also included in the All Other category
       are corporate related expenses including marketing, customer service,
       management information systems, accounting, legal and regulatory, human
       resources and other general and administrative expenses. In 2001 the All
       Other category includes revenues and costs associated with a sale of
       undersea fiber optic cable system capacity (see note 1(e)).

       We evaluate performance and allocate resources based on (1) earnings or
       loss from operations before depreciation, amortization, net interest
       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.

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

<TABLE>
       Summarized financial information for our reportable segments for the six
       month periods ended June 30, 2001 and 2000 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>
            2001
       Revenues:
         Intersegment                  $   9,925        754    3,754    2,659       17,092          169     17,261
         External                         96,087     36,919   12,141    5,753      150,900       31,552    182,452
                                     ------------------------------------------------------------------------------
            Total revenues             $ 106,012     37,673   15,895    8,412      167,992       31,721    199,713
                                     ==============================================================================

       Earnings (loss) from
         operations before
         depreciation,
         amortization, net interest
         expense and income taxes      $  40,686     18,518    4,395   (4,515)      59,084       (9,524)    49,560
                                     ==============================================================================

       Operating income (loss)         $  29,145      8,493    2,733   (5,840)      34,531      (12,610)    21,921
                                     ==============================================================================

            2000
       Revenues:
         Intersegment                  $   6,742        739    3,146    1,281       11,908          ---     11,908
         External                         88,475     32,590    9,309    3,731      134,105        5,598    139,703
                                     ------------------------------------------------------------------------------
            Total revenues             $  95,217     33,329   12,455    5,012      146,013        5,598    151,611
                                     ==============================================================================

       Earnings (loss) from
         operations before
         depreciation,
         amortization, net interest
         expense and income taxes      $  34,382     16,143    1,320   (4,706)      47,139      (17,006)    30,133
                                     ==============================================================================

       Operating income (loss)         $  23,299      6,872   (1,246)  (5,548)      23,377      (18,838)     4,539
                                     ==============================================================================
</TABLE>
<TABLE>
       A reconciliation of reportable segment revenues to consolidated revenues
       follows:
<CAPTION>
                 Six months ended June 30,                                          2001           2000
                                                                               -------------- --------------
                 <S>                                                          <C>                 <C>
                 Reportable segment revenues                                  $   167,992         146,013
                 Plus All Other revenues                                           31,721           5,598
                 Less intersegment revenues eliminated in consolidation           (17,261)        (11,908)
                                                                               -------------- --------------
                      Consolidated revenues                                   $   182,452         139,703
                                                                               ============== ==============
</TABLE>

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

<TABLE>
       A reconciliation of reportable segment earnings from operations before
       depreciation, amortization, net interest expense and income taxes to
       consolidated net income (loss) before income taxes follows:
<CAPTION>
                 Six months ended June 30,                                          2001           2000
                                                                               -------------- --------------
                 <S>                                                          <C>                 <C>
                 Reportable segment earnings from operations before
                   depreciation, amortization, net interest expense and
                   income taxes                                               $    59,084          47,139
                 Less All Other loss from operations before depreciation,
                   amortization, net interest expense and income taxes             (9,524)        (17,006)
                 Less intersegment contribution eliminated in consolidation          (468)           (112)
                                                                               -------------- --------------
                      Consolidated earnings from operations before
                        depreciation, amortization, net interest expense
                        and income taxes                                           49,092          30,021
                 Depreciation and amortization                                     27,639          25,594
                                                                               -------------- --------------
                      Consolidated operating income                                21,453           4,427
                 Interest expense, net                                             16,695          19,054
                                                                               -------------- --------------
                      Consolidated net income (loss) before income taxes      $     4,758         (14,627)
                                                                               ============== ==============
</TABLE>
<TABLE>
       A reconciliation of reportable segment operating income to consolidated
       net income (loss) before income taxes follows:
<CAPTION>
                 Six months ended June 30,                                          2001           2000
                                                                               -------------- --------------
                 <S>                                                          <C>                 <C>
                 Reportable segment operating income                          $    34,531          23,377
                 Less All Other operating loss                                    (12,610)        (18,838)
                 Less intersegment contribution eliminated in consolidation          (468)           (112)
                                                                               -------------- -------------
                      Consolidated operating income                                21,453           4,427
                 Interest expense, net                                             16,695          19,054
                                                                               -------------- -------------
                      Consolidated net income (loss) before income taxes      $     4,758         (14,627)
                                                                               ============== =============
</TABLE>
  (5)  Commitments and Contingencies

       Acquisition
       On June 15, 2001 we signed an agreement with Rogers Cable, Inc. to
       acquire all of the stock of Rogers American Cablesystems, Inc., a cable
       television service provider in Palmer and Wasilla, Alaska for $19.0
       million in cash. The acquisition is subject to regulatory approval and is
       expected to be finalized in the fourth quarter of 2001.

       Litigation and Disputes
       We are routinely involved in various lawsuits, billing disputes, legal
       proceedings and regulatory matters that have arisen in the normal course
       of business. While the ultimate results of these items cannot be
       predicted with certainty, we do not expect at this time the resolution of
       them to have a material adverse effect on our financial position, results
       of operations or our liquidity.

                                       15
<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."

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

GCI, Inc. was incorporated in 1997 to effect the issuance of senior notes. GCI,
Inc., a wholly owned subsidiary of GCI, received through its initial
capitalization all ownership interests in subsidiaries previously held by GCI.
Shares of GCI's Class A common stock are traded on the Nasdaq National Market
tier of the Nasdaq Stock Market under the symbol GNCMA. Shares of GCI's Class B
common stock are traded on the Over-the-Counter market.

Overview
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 and
maintenance capital expenditures through our cash flows from operating
activities. Cash requirements for acquisitions and other capital expenditures
have been provided largely through our financing activities.

Long-Distance Services
During the second quarter of 2001 long-distance services revenue represented
58.3% of consolidated revenues. Our provision of interstate and intrastate
long-distance services to residential, commercial and governmental customers and
to other common carriers (principally WorldCom and Sprint), and provision of
private line and leased dedicated capacity services accounted for 95.0% of our
total long-distance services revenues during the second quarter of 2001. Factors
that have the greatest impact on year-to-year changes in long-distance services
revenues include the rate per minute charged to customers, usage volumes
expressed as minutes of use, and the number of private line and leased dedicated
service products in use.

Revenues from private line and other data services sales increased 37.1% to $9.2
million during the second quarter of 2001 as compared to the second quarter of
2000 due primarily to increasing demand for our data services by commercial and
governmental customers.

We introduced a broadband product offering to hospitals and health clinics in
2000, supplementing broadband revenues derived from our SchoolAccess(TM)
offering to rural school districts. Total broadband revenues increased 61.2% to
$3.8 million during the second quarter of 2001 as compared to the second quarter
of 2000. We will provide SchoolAccess(TM) services to nine school districts in
Arizona and New Mexico beginning July 2001.

Our long-distance cost of sales and services has consisted principally of direct
costs of providing services, including local access charges paid to Local
Exchange Carriers ("LECs") for originating and terminating long-distance calls
in Alaska, and fees paid to other long-distance carriers to carry calls
terminating in areas not served by our network (principally the lower 49 states,
most of which calls are carried over WorldCom's

                                       16
<PAGE>
network, and international locations, which calls are carried principally over
Sprint's network). During the second quarter of 2001, local access charges
accounted for 64.8% of long-distance cost of sales and services, fees paid to
other long-distance carriers represented 27.7%, satellite transponder lease and
undersea fiber maintenance costs represented 3.3%, and other costs represented
4.2% of long-distance cost of sales and services.

Our long-distance selling, general, and administrative expenses have consisted
of operating and engineering, customer service, sales and communications,
management information systems, general and administrative, and legal and
regulatory expenses. Most of these expenses consist of salaries, wages and
benefits of personnel and certain other indirect costs (such as rent, travel,
utilities, insurance and property taxes). A significant portion of long-distance
selling, general, and administrative expenses, 34.3% during the second quarter
of 2001, represents operating and engineering costs.

Long-distance services face significant competition from AT&T Alascom, Inc.,
long-distance resellers, and from local telephone companies that have entered
the long-distance market. 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.

Revenues derived from other common carriers increased 9.3% to $19.2 million
during the second quarter of 2001 as compared to the second quarter of 2000. The
average rate charged other common carriers increased 7.5% during the same period
due to a certain category of wholesale minutes no longer carried for such
customers and the total minutes carried for such customers increased 1.7%. In
conjunction with our purchase of a controlling interest in Kanas (see note 3 to
the accompanying Notes to Interim Condensed Consolidated Financial Statements)
we negotiated a contract amendment with WorldCom in March 2001. The amendment
extends the contract term for five years to March 2006 and reduces the rate to
be charged by us for certain WorldCom traffic over the extended term of the
contract. The Sprint contract was also amended in March 2001 extending its term
two years to March 2004 with two one-year automatic extensions to March 2006.
The amendment reduces the rate to be charged by us for certain Sprint traffic
over the extended term of the contract.

Other common carrier traffic routed to us for termination in Alaska is largely
dependent on traffic routed to WorldCom and Sprint by their customers. Pricing
pressures, new program offerings and market consolidation continue to evolve in
the markets served by WorldCom and Sprint. If, as a result, their traffic is
reduced, or if their competitors' costs to terminate or originate traffic in
Alaska are reduced, 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.

Cable Services
During the second quarter of 2001, cable television revenues represented 22.1%
of consolidated revenues. The cable systems serve 31 communities and areas in
Alaska, including the state's three largest population centers, Anchorage,
Fairbanks and Juneau.

On March 31, 2001 we acquired the assets and customer base of G.C. Cablevision,
Inc., with approximately 1,000 subscribers in Fairbanks and North Pole, Alaska.

On June 15, 2001 we signed an agreement with Rogers Cable, Inc. to acquire all
of the stock of Rogers American Cablesystems, Inc., a cable television service
provider in Palmer and Wasilla, Alaska for $19.0 million in cash. The
acquisition is subject to regulatory approval and is expected to be finalized in
the fourth

                                       17
<PAGE>
quarter of 2001. This acquisition will result in an additional 10,000 homes
passed and will add more than 7,000 subscribers.

We generate cable services revenues from four primary sources: (1) digital and
analog programming services, including monthly basic or premium subscriptions
and pay-per-view movies or other one-time events, such as sporting events; (2)
equipment rentals or installation; (3) advertising sales; and (4) cable modem
services (shared with our Internet services segment). During the second quarter
of 2001 programming services generated 80.1% of total cable services revenues,
equipment rental and installation fees accounted for 9.4% of such revenues,
cable modem services accounted for 6.3% of such revenues, advertising sales
accounted for 3.4% of such revenues, and other services accounted for the
remaining 0.8% of total cable services revenues. The primary factors that
contribute to year-to-year changes in cable services revenues are average
monthly subscription and pay-per-view rates, the mix among basic, premium and
pay-per-view services and 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.

The cable systems' cost of sales and selling, general and administrative
expenses have consisted principally of programming and copyright expenses,
labor, maintenance and repairs, marketing and advertising and equipment rental
expense. During the second quarter of 2001 programming and copyright expenses
represented 47.4% of total cable cost of sales and selling, general and
administrative expenses, and general and administrative costs represented 45.7%
of such total. Marketing and advertising costs represented approximately 7.0% of
such total expenses.

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

Local Access Services
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. Local exchange services revenues totaled $6.2 million
in the second quarter of 2001 representing 7.2% of consolidated revenues. The
primary factors that contribute to year-to-year changes in local access services
revenues are the average number of business and residential subscribers to our
services during a given reporting period, the average monthly rates charged for
non-traffic sensitive services and the number and type of additional premium
features selected.

Local access cost of sales represented approximately 53.4% of total local access
services cost of sales and selling, general and administrative expenses during
the second quarter of 2001. General and administrative and customer service
costs represented approximately 33.4% of such total expenses, marketing and
advertising costs represented approximately 8.6% of such total expenses, and
operating and engineering expenses represented approximately 4.6% of such total
expenses.

Our local access services segment faces significant competition in Anchorage
from the Incumbent Local Exchange Carrier ("ILEC") Alaska Communications
Systems, Inc. ("ACS") and AT&T Alascom, Inc. We believe our approach to
developing, pricing, and providing local access services and bundling different
business segment services will allow us to be competitive in providing those
services.

                                       18
<PAGE>
Internet Services
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) cable modem services (a
portion of cable modem revenue is also recognized by our cable services
segment). Internet services segment revenues totaled $3.1 million representing
3.7% of total revenues in the second quarter of 2001. The primary factors that
contribute to year-to-year changes in Internet services revenues are the average
number of subscribers to our services during a given reporting period, the
average monthly subscription rates, and the number and type of additional
premium features selected.

Operating and general and administrative expenses represented approximately
48.1% of total Internet services cost of sales and selling, general and
administrative expenses during the second quarter of 2001. Internet cost of
sales represented approximately 39.0% of such total expenses and marketing and
advertising represented approximately 12.9% of such total expenses.

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.

Other Services and Other Expenses
Telecommunications services revenues reported in the All Other category as
described in note 4 in the accompanying Notes to Interim Condensed Consolidated
Financial Statements include corporate network management contracts,
telecommunications equipment sales and service, management services for Kanas,
and other miscellaneous revenues (including revenues from cellular resale
services, prepaid and debit calling card sales, and installation and leasing of
customer's very small aperture terminal ("VSAT") equipment).

Revenues included in the All Other category represented 8.7% of total revenues
in the second quarter of 2001 and included network solutions and outsourcing
revenues totalling $6.0 million, communications equipment sales, cellular resale
and other revenues totalling $1.5 million.

Depreciation, amortization and net interest expense on a consolidated basis
decreased $46,000 in the second quarter of 2001 as compared to the second
quarter of 2000 resulting primarily from decreased interest rates in 2001 on our
variable rate debt, the effect of an interest rate swap agreement described
below, and decreased average outstanding long-term debt balances. Partially
offsetting these decreases was an increase in our depreciation expense due to
our $48.9 million investment in equipment and facilities placed into service
during 2000 for which a full year of depreciation will be recorded during the
year ended December 31, 2001 and the $28.4 million investment in other equipment
and facilities during the first six months of 2001 for which a partial year of
depreciation will be recorded during 2001.

                                       19
<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 and the percentage
changes in such data as compared to the corresponding prior year period:

(Underlying data rounded to the nearest thousands)
<CAPTION>
                                                         Three Months Ended                   Six Months Ended
                                                              June 30,                            June 30,
                                                                         Percentage                          Percentage
                                                                           Change                              Change
                                                                          2001 vs.                            2001 vs.
      (Unaudited)                                    2001       2000        2000         2001       2000        2000
                                                     ----       ----        ----         ----       ----        ----
      <S>                                           <C>       <C>        <C>           <C>        <C>           <C>
      Statement of Operations Data:
      Revenues
          Long-distance services                     58.3%      62.8%       11.1%        52.7%      63.3%         8.6%
          Cable services                             22.1%      23.3%       13.3%        20.2%      23.3%        13.3%
          Local access services                       7.2%       6.7%       29.1%         6.7%       6.7%        30.4%
          Internet services                           3.7%       2.8%       55.3%         3.1%       2.7%        54.2%
          Other services                              8.7%       4.4%      141.4%        17.3%       4.0%       463.5%
                                                 -----------------------------------------------------------------------
             Total revenues                         100.0%     100.0%       19.8%       100.0%     100.0%        30.6%

      Cost of sales and services                     39.6%      41.5%       14.2%        41.6%      42.4%        28.0%
      Selling, general and administrative
        expenses                                     34.6%      36.0%       15.0%        31.5%      36.1%        14.0%
      Depreciation and amortization                  16.0%      17.5%        9.5%        15.1%      18.3%         8.0%
                                                 -----------------------------------------------------------------------
             Operating income                         9.8%       5.0%      136.9%        11.8%       3.2%       384.6%
             Net income (loss) before income
               taxes                                  0.5%      (7.9%)     107.7%         2.6%     (10.5%)      132.5%
             Net income (loss)                        0.2%      (4.9%)     104.7%         1.4%      (6.5%)      128.7%

      Other Operating Data (1):
      Cable services operating income (2)            22.7%      22.3%       15.7%        23.0%      21.1%        23.6%
      Local services operating income (loss) (3)     23.6%      (3.3%)   1,036.5%        22.5%     (13.4%)      319.3%
      Internet services operating loss (4)          (94.6%)   (137.3%)      (7.0%)     (101.5%)   (148.7%)       (5.3%)
<FN>
   --------------------------
   (1)Includes customer service, marketing and advertising costs.
   (2)Computed as a percentage of total cable services revenues.
   (3)Computed as a percentage of total local services revenues.
   (4)Computed as a percentage of total Internet services revenues.
</FN>
</TABLE>
THREE MONTHS ENDED JUNE 30, 2001 ("2001") COMPARED TO THREE MONTHS
ENDED JUNE 30, 2000 ("2000")

Revenues
Total revenues increased 19.8% from $71.4 million in 2000 to $85.5 million in
2001.
                                       20
<PAGE>
Long-distance revenues from residential, commercial, governmental, and other
common carrier customers increased 11.1% to $49.9 million in 2001. The increase
was largely due to the following:

   - An increase of 37.1% in private line and private network transmission
     services revenues to $9.2 million in 2001 due to an increased number of
     leased circuits in service,
   - An increase of 9.3% in revenues from other common carriers (principally
     WorldCom and Sprint) to $19.2 million in 2001,
   - An increase of 61.2% to $3.8 million in 2001 revenues from our
     SchoolAccess(TM) offering to rural school districts and our packaged
     telecommunications offering to rural hospitals and health clinics. Our
     SchoolAccess(TM) product was provided to 157 schools at June 30, 2001, a
     6.1% increase from June 30, 2000, and
   - An increase of 0.5% in total minutes of use to 261.0 million minutes
     primarily due to a 1.7% increase in wholesale minutes carried for other
     common carriers. Comparable minutes over the prior year increased 15.5%,
     after excluding certain low-margin wholesale minutes no longer carried on
     our network. The minute growth is due primarily to increases in traffic
     carried for other common carriers.

Long-distance revenue increases were offset by the following:

   - A 5.4% decrease in our average rate per minute on long-distance traffic to
     $0.114 per minute in 2001 attributed to our promotion of and customers'
     enrollment in calling plans offering discounted rates and length of service
     rebates, such plans being prompted in part by our long-distance competitors
     reducing their rates, off-set by a 7.5% increase in the average rate per
     minute on minutes carried for other common carriers due to the discontinued
     carriage of certain low-margin wholesale minutes, and
   - A decrease of 5.5% in the number of active residential, small business and
     commercial customers billed to 87,900 at June 30, 2001 primarily due to a
     competitor's offering allowing customers to place unlimited intrastate and
     interstate calls for a flat monthly fee. The competitor discontinued the
     unlimited minutes offering in the second quarter of 2001.

Cable revenues increased 13.3% to $18.9 million in 2001. Programming services
revenues increased 6.2% to $15.1 million in 2001 resulting from an increase of
approximately 4,300 basic subscribers served to approximately 123,000 (of which
approximately 1,000 basic subscribers were acquired from G.C. Cablevision, Inc.
on March 31, 2001) and increased pay-per-view, premium, and digital service
revenues off-set by a decrease of $1.74 or 3.6% in average gross revenue per
average basic subscriber per month. New facility construction efforts in 2000
and 2001 resulted in approximately 3,500 additional homes passed which
contributed to additional subscribers and revenues in 2001. Digital subscriber
counts increased 104.4% to 18,200 at June 30, 2001 as compared to June 30, 2000.
The cable services segment's share of cable modem revenue (offered through our
Internet services segment) increased $850,000 to $1.2 million in 2001.

Local access services revenues increased 29.1% in 2001 to $6.2 million. At June
30, 2001 approximately 69,000 lines were in service as compared to approximately
54,600 lines in service at June 30, 2000.

Internet services revenues increased 55.3% to $3.1 million in 2001 primarily due
to growth in the average number of customers served. We had approximately 65,500
active residential, commercial and small business retail dial-up Internet
subscribers at June 30, 2001 as compared to approximately 59,000 at June 30,
2000. We had approximately 19,600 active residential, commercial and small
business retail cable modem subscribers at June 30, 2001 as compared to
approximately 11,100 at June 30, 2000.

The increase in other services revenues from $3.1 million in 2000 to $7.5
million in 2001 is primarily due to increased revenues from managed services.

                                       21
<PAGE>
Cost of Sales and Services
Cost of sales and services totaled $33.8 million in 2001 and $29.6 million in
2000. As a percentage of total revenues, cost of sales and services decreased
from 41.5% in 2000 to 39.6% in 2001.

Long-distance cost of sales and services decreased 4.0% to $18.6 million in
2001. Long-distance cost of sales as a percentage of long-distance revenues
decreased from 43.2% in 2000 to 37.4% in 2001 primarily due to the effect of
reassigning traffic carried by satellite transponders and fiber optic cable from
leased to owned capacity and reductions in access costs due to distribution and
termination of our traffic on our own local services network instead of paying
other carriers to distribute and terminate our traffic. Offsetting the 2001
decrease as compared to 2000 is a decrease in the average rate per minute billed
to customers without a comparable decrease in access charges paid by us. We
expect cost savings to occur when traffic carried on our own facilities grows.

Cable cost of sales and services increased 15.8% to $5.1 million in 2001. Cable
cost of sales and services as a percentage of cable revenues, which is less as a
percentage of revenues than are long-distance, local access and Internet
services cost of sales and services, increased from 26.2% in 2000 to 26.8% in
2001. Cable services rate increases did not keep pace with increases in
programming costs in 2001. Programming costs increased for most of our cable
services offerings, and we incurred additional costs on new programming
introduced in 2000 and 2001.

Local access services cost of sales and services increased 17.9% to $3.5 million
in 2001. Local access services cost of sales and services as a percentage of
local access services revenues decreased from 61.9% in 2000 to 56.6% in 2001. As
local access services revenues increase, economies of scale and more efficient
network utilization result in reduced local access services cost of sales and
services as a percentage of local access services revenues.

Internet services cost of sales and services increased 21.8% to $1.3 million in
2001. Internet services costs of sales as a percentage of Internet services
revenues totaled 40.1% and 51.2% in 2001 and 2000, respectively. The Internet
services costs of sales decrease as a percentage of Internet services revenues
is primarily due to a $1.2 million increase in Internet's portion of cable modem
revenue which generally has higher margins than do other Internet products. As
Internet revenues increase, economies of scale and more efficient network
utilization result in reduced Internet cost of sales and services as a
percentage of Internet revenues.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 15.0% to $29.6 million in
2001 and, as a percentage of total revenues, decreased from 36.0% in 2000 to
34.6% in 2001. The increase in 2001 is due to increased health insurance costs,
increased accrual of a company-wide success sharing bonus and increased
allowance for doubtful accounts receivable.

Depreciation and Amortization
Depreciation and amortization expense increased 9.5% to $13.7 million in 2001.
The increase is attributable to our $48.9 million investment in equipment and
facilities placed into service during 2000 for which a full year of depreciation
will be recorded during the year ended December 31, 2001 and the $28.4 million
investment in other equipment and facilities during the first six months of 2001
for which a partial year of depreciation will be recorded during 2001.

Interest Expense, Net
Interest expense, net of interest income, decreased 13.5% to $8.0 million in
2001. This decrease resulted primarily from decreased interest rates in 2001 on
our variable rate debt, approximately $285,000 earned from an interest rate swap
agreement described below, and decreased average outstanding long-term debt
balances.

                                       22
<PAGE>
On January 3, 2001 we entered into an interest rate swap agreement to convert
$50 million in 9.75% fixed rate debt to a variable interest rate equal to the 90
day Libor rate plus 334 basis points. The differential to be paid or received is
recorded as an increase or decrease in interest expense in the consolidated
statements of operations in the period in which it is recognized. The agreement
extends through August 1, 2007 and is cancelable at the option of the
counterparty beginning August 1, 2002. We are exposed to credit losses from
counterparty nonperformance, but do not anticipate any such losses from our
agreement.

Income Tax Benefit (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 of income tax
benefit reflects the consolidated group's activity. Income tax benefit (expense)
was $2.1 million in 2000 and ($270,000) in 2001. The change was due to net
income before income taxes in 2001 as compared to net loss before income taxes
in 2000. Our effective income tax rate increased from 37.8% in 2000 to 61.9% in
2001 due to the effect of items that are nondeductible for income tax purposes.

SIX MONTHS ENDED JUNE 30, 2001 ("2001") COMPARED TO SIX MONTHS
ENDED JUNE 30, 2000 ("2000")

Revenues
Total revenues increased 30.6% from $139.7 million in 2000 to $182.5 million in
2001. Excluding the fiber optic cable capacity sale in 2001 as described in note
1(e) in the accompanying Notes to Interim Condensed Consolidated Financial
Statements, total revenues increased 16.6%.

Long-distance revenues from residential, commercial, governmental, and other
common carrier customers increased 8.6% to $96.1 million in 2001. The increase
was largely due to the following:

   - An increase of 43.8% in private line and private network transmission
     services revenues to $18.5 million in 2001 due to an increased number of
     leased circuits in service,
   - An increase of 8.7% in revenues from other common carriers (principally
     WorldCom and Sprint) to $37.1 million in 2001, and
   - An increase of 61.0% to $6.4 million in 2001 revenues from our
     SchoolAccess(TM) offering to rural school districts and our packaged
     telecommunications offering to rural hospitals and health clinics. Our
     SchoolAccess(TM) product was provided to 157 schools at June 30, 2001, a
     6.1% increase from June 30, 2000.

Long-distance revenue increases were offset by the following:

   - A decrease of 2.1% in total minutes of use to 504.2 million minutes
     primarily due to certain low-margin wholesale minutes no longer carried for
     other common carriers. Comparable minutes over the prior year increased
     12.6%, after excluding certain low-margin wholesale minutes no longer
     carried for other common carriers. The minute growth is due primarily to
     increases in traffic carried for other common carriers,
   - A 5.7% decrease in our average rate per minute on long-distance traffic to
     $0.116 per minute in 2001 attributed to our promotion of and customers'
     enrollment in calling plans offering discounted rates and length of service
     rebates, such plans being prompted in part by our long-distance competitors
     reducing their rates, off-set by a 10.3% increase in the average rate per
     minute on minutes carried for other common carriers due to the discontinued
     carriage of certain low-margin wholesale minutes, and
   - A decrease of 5.5% in the number of active residential, small business and
     commercial customers billed to 87,900 at June 30, 2001 primarily due to a
     competitor's offering allowing customers to

                                       23
<PAGE>
     place unlimited intrastate and interstate calls for a flat monthly fee. The
     competitor discontinued the unlimited minutes offering in the second
     quarter of 2001.

Cable revenues increased 13.3% to $36.9 million in 2001. Programming services
revenues increased 6.2% to $29.8 million in 2001 resulting from an increase of
approximately 4,300 basic subscribers served to approximately 123,000 (of which
approximately 1,000 basic subscribers were acquired from G.C. Cablevision, Inc.
on March 31, 2001) and increased pay-per-view, premium, and digital service
revenues off-set by a decrease of $1.74 or 3.6% in average gross revenue per
average basic subscriber per month. New facility construction efforts in 2000
and 2001 resulted in approximately 3,500 additional homes passed which
contributed to additional subscribers and revenues in 2001. Digital subscriber
counts increased 104.4% to 18,200 at June 30, 2001 as compared to June 30, 2000.
The cable services segment's share of cable modem revenue (offered through our
Internet services segment) increased $1.4 million to $2.2 million in 2001.

Local access services revenues increased 30.4% in 2001 to $12.1 million. At June
30, 2001 approximately 69,000 lines were in service as compared to approximately
54,600 lines in service at June 30, 2000.

Internet services revenues increased 54.2% to $5.8 million in 2001 primarily due
to growth in the average number of customers served. We had approximately 65,500
active residential, commercial and small business retail dial-up Internet
subscribers at June 30, 2001 as compared to approximately 59,000 at June 30,
2000. We had approximately 19,600 active residential, commercial and small
business retail cable modem subscribers at June 30, 2001 as compared to
approximately 11,100 at June 30, 2000.

The increase in other services revenues from $5.6 million in 2000 to $31.6
million in 2001 is primarily due to the $19.5 million fiber capacity sale in
2001 as previously described and increased revenues from managed services.

Cost of Sales and Services
Cost of sales and services totaled $75.9 million in 2001 and $59.3 million in
2000. As a percentage of total revenues, cost of sales and services decreased
from 42.4% in 2000 to 41.6% in 2001. Excluding the fiber capacity sale in 2001,
total cost of sales and services as a percentage of total revenues decreased
from 42.4% in 2000 to 39.9% in 2001.

Long-distance cost of sales and services decreased 7.6% to $36.8 million in
2001. Long-distance cost of sales as a percentage of long-distance revenues
decreased from 45.1% in 2000 to 38.3% in 2001 primarily due to the effect of
reassigning traffic carried by satellite transponders and fiber optic cable from
leased to owned capacity and reductions in access costs due to distribution and
termination of our traffic on our own local services network instead of paying
other carriers to distribute and terminate our traffic. Offsetting the 2001
decrease as compared to 2000 is a decrease in the average rate per minute billed
to customers without a comparable decrease in access charges paid by us. We
expect cost savings to occur when traffic carried on our own facilities grows.

Cable cost of sales and services increased 15.5% to $10.0 million in 2001. Cable
cost of sales and services as a percentage of cable revenues, which is less as a
percentage of revenues than are long-distance, local access and Internet
services cost of sales and services, increased from 26.6% in 2000 to 27.1% in
2001. Cable services rate increases did not keep pace with increases in
programming costs in 2001. Programming costs increased for most of our cable
services offerings, and we incurred additional costs on new programming
introduced in 2000 and 2001.

Local access services cost of sales and services increased 23.2% to $6.6 million
in 2001. Local access services cost of sales and services as a percentage of
local access services revenues decreased from 57.8% in 2000 to 54.7% in 2001. As
local access services revenues increase, economies of scale and more efficient

                                       24
<PAGE>
network utilization result in reduced local access services cost of sales and
services as a percentage of local access services revenues.

Internet services cost of sales and services increased 15.0% to $2.4 million in
2001. Internet services costs of sales as a percentage of Internet services
revenues totaled 42.1% and 56.5% in 2001 and 2000, respectively. The Internet
services costs of sales decrease as a percentage of Internet services revenues
is primarily due to a $2.3 million increase in Internet's portion of cable modem
revenue which generally has higher margins than do other Internet products. As
Internet revenues increase, economies of scale and more efficient network
utilization result in reduced Internet cost of sales and services as a
percentage of Internet revenues.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 14.0% to $57.4 million in
2001 and, as a percentage of total revenues, decreased from 36.1% in 2000 to
31.5% in 2001. Excluding the fiber capacity sale in 2001, selling, general and
administrative expenses, as a percentage of total revenues, decreased from 36.1%
in 2000 to 34.5% in 2001. The increase in 2001 is due to increased health
insurance costs, increased accrual of a company-wide success sharing bonus and
increased allowance for doubtful accounts receivable.

Depreciation and Amortization
Depreciation and amortization expense increased 8.0% to $27.6 million in 2001.
The increase is attributable to our $48.9 million investment in equipment and
facilities placed into service during 2000 for which a full year of depreciation
will be recorded during the year ended December 31, 2001 and the $28.4 million
investment in other equipment and facilities during 2001 for which a partial
year of depreciation will be recorded during 2001.

Interest Expense, Net
Interest expense, net of interest income, decreased 12.4% to $16.7 million in
2001. This decrease resulted primarily from decreased interest rates in 2001 on
our variable rate debt, approximately $285,000 earned from an interest rate swap
agreement, and decreased average outstanding long-term debt balances. Partially
offsetting these decreases was an increase in our average outstanding capital
lease obligation balances resulting from the lease of satellite transponder
capacity.

Income Tax Benefit (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 discussions of income tax
benefit and net operating loss carryforwards reflect the consolidated group's
activity and balances.

Income tax benefit (expense) was $5.6 million in 2000 and ($2.2) million in
2001. The change was due to net income before income taxes in 2001 as compared
to net loss before income taxes in 2000. Our effective income tax rate increased
from 38.3% in 2000 to 45.6% in 2001 due to the effect of items that are
nondeductible for income tax purposes.

At June 30, 2001, we have (1) tax net operating loss carryforwards of
approximately $101.0 million that will begin expiring in 2008 if not utilized,
and (2) alternative minimum tax credit carryforwards of approximately $2.6
million available to offset regular income taxes payable in future years. Our
utilization of remaining net operating loss carryforwards is subject to certain
limitations pursuant to Internal Revenue Code section 382.

Tax benefits associated with recorded deferred tax assets are considered to be
more likely than not realizable through future reversals of existing taxable
temporary differences and future taxable income exclusive of reversing temporary
differences and carryforwards. The amount of deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward

                                       25
<PAGE>
period are reduced. We estimate that our effective income tax rate for financial
statement purposes will be approximately 55% to 60% in 2001.

                 FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
<TABLE>
The following chart provides selected unaudited statement of operations data
from our quarterly results of operations during 2001 and 2000:
<CAPTION>
                                                            (Amounts in thousands, except per share amounts)
                                                      -------------------------------------------------------------
                                                       First         Second       Third       Fourth        Total
                                                       Quarter       Quarter     Quarter     Quarter         Year
                                                      -------------------------------------------------------------
     <S>                                             <C>              <C>         <C>        <C>         <C>
     2001
     ----
     Revenues:
       Long-distance services                        $    46,236      49,851                              96,087
       Cable services                                     18,046      18,873                              36,919
       Local access services                               5,958       6,183                              12,141
       Internet services                                   2,619       3,134                               5,753
       Other services                                     24,058       7,494                              31,552
                                                      -------------------------------------------------------------
          Total revenues                                  96,917      85,535                             182,452
     Operating income                                     13,042       8,411                              21,453
     Net income before income taxes                        4,322         436                               4,758
     Net income                                            2,423         166                               2,589

     2000
     ----
     Revenues:
       Long-distance services                        $    43,620      44,855      48,185     46,016      182,676
       Cable services                                     15,930      16,660      16,708     18,600       67,898
       Local access services                               4,520       4,789       5,236      5,660       20,205
       Internet services                                   1,713       2,018       2,188      2,506        8,425
       Other services                                      2,494       3,104       3,589      4,214       13,401
                                                      -------------------------------------------------------------
          Total revenues                                  68,277      71,426      75,906     76,996      292,605
     Operating income                                        877       3,550       5,610      5,966       16,003
     Net loss before income taxes                         (8,962)     (5,665)     (3,954)    (3,068)     (21,649)
     Net loss                                             (5,498)     (3,526)     (2,352)    (1,858)     (13,234)
</TABLE>
Revenues
Total revenues for the quarter ended June 30, 2001 ("second quarter") were $85.5
million, representing a 11.7% decrease from $96.9 million for the quarter ended
March 31, 2001 ("first quarter"). Excluding the first quarter fiber capacity
sale, total second quarter revenues increased 10.5%.

Cost Of Sales and Services
Cost of sales and services decreased from $42.1 million in the first quarter to
$33.8 million in the second quarter. Excluding the fiber capacity sale, cost of
sales and services totaled $31.2 million in the first quarter. As a percentage
of revenues, first and second quarter cost of sales and services totaled 43.4%
and 39.6%, respectively. Excluding the fiber capacity sale, cost of sales and
services totaled 40.3% as a percentage of revenues in first quarter. The second
quarter decrease as a percentage of revenues results from reductions in access
costs due to distribution and termination of traffic on our own long-distance
and local services networks instead of paying other carriers to distribute and
terminate our traffic. Partially off-setting the second quarter decrease is a
decrease in the average rate per minute billed to customers without a comparable
decrease in access charges paid by us, and increased cable programming costs
without a corresponding revenue increase. We expect cost savings to continue as
traffic carried on our own facilities grows.

                                       26
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.7 million in the
second quarter as compared to the first quarter. As a percentage of revenues,
second quarter selling, general and administrative expenses were 34.6% as
compared to 28.7% for the first quarter. Excluding the fiber capacity sale in
the first quarter, selling, general and administrative expenses were 34.3% as a
percentage of revenues in the first quarter.

Net Income
We reported net income of $166,000 for the second quarter as compared to a $2.4
million for the first quarter. The decrease is primarily due to the fiber
capacity sale in the first quarter.

                         LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities totaled $45.7 million in the six-month
period ended June 30, 2001 ("2001") as compared to $19.9 million in the
six-month period ended June 30, 2000 ("2000"), net of changes in the components
of working capital. The increase in 2001 is, in part, due to the fiber capacity
sale in 2001. Expenditures for property and equipment, including construction in
progress, totaled $28.4 million in 2001. Other uses of cash during 2001 included
repayment of $12.6 million of long-term borrowings and capital lease
obligations, advances to Kanas and payments on Kanas' behalf of approximately
$5.6 million (see note 3 to the accompanying Notes to Interim Condensed
Consolidated Financial Statements), and payment of a $1.2 million equipment
lease deposit. Other sources of cash include a $1.1 million contribution from
GCI.

Trade receivables increased $7.2 million from December 31, 2000 to June 30, 2001
primarily due to an increase in other common carrier trade receivables.

Working capital totaled ($5.4) million at June 30, 2001, a $14.4 million
decrease from working capital of $9.0 million as of December 31, 2000. The
decrease is primarily attributed to our use of proceeds from the fiber capacity
sale to purchase long-term capital assets and repay long-term debt.

On October 25, 2000 and March 23, 2001 we amended the Holdings $150,000,000 and
$50,000,000 credit facilities. The amendments contain, among other things,
provision for payment of a one-time amendment fee of $192,500, changes in
certain financial covenants and ratios, and a limit of $70 million for 2001
capital expenditures (excluding capital expenditures by certain subsidiaries).
Under these amendments, Holdings may not permit the ratio of senior debt to
annualized operating cash flow (as defined) of Holdings and certain of its
subsidiaries to exceed 2.50 to 1.0 through September 30, 2003 and must maintain
a ratio of annualized operating cash flow to fixed charges of at least 1.0 to
1.0 effective January 1, 2002 (which adjusts to 1.05 to 1.0 in April, 2003 and
thereafter).

We were in compliance with all loan covenants at June 30, 2001.

Our expenditures for property and equipment, including construction in progress,
totaled $28.4 million and $18.9 million during the first six months of 2001 and
2000, respectively. We expect our expenditures for property and equipment,
including construction in progress, for our core operations to total
approximately $55.0 to $60.0 million during the year ended December 31, 2001.
Planned capital expenditures over the next five years include those necessary
for continued expansion of our long-distance, local exchange and Internet
facilities, continuing development of our PCS network and upgrades to our cable
television plant.

The long-distance, local access, cable, Internet and wireless services
industries are experiencing increasing competition and rapid technological
changes. Our future results of operations will be affected by our ability to
react to changes in the competitive environment and by our ability to fund and
implement new

                                       27
<PAGE>
technologies. We are unable to determine how competition, technological changes
and our net losses (excluding the effect of the fiber capacity sale) will affect
our ability to obtain financing.

We believe that we will be able to meet our current and long-term liquidity and
capital requirements, including our negative working capital at June 30, 2001,
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. We plan to fund the acquisition of Rogers
American Cablesystems, Inc. through our senior credit facility. Should cash
flows be insufficient to support additional borrowings, capital expenditures
will likely be reduced.

                          New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations." SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
Use of the pooling-of-interests method will be prohibited on a prospective basis
only. We do not expect that the adoption of SFAS No. 141 will have a significant
impact on our financial condition or results of operations.

In July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 changes the accounting for
goodwill from an amortization method to an impairment-only approach. Thus,
amortization of goodwill including goodwill recorded in past business
combinations, will cease upon adoption of SFAS No. 142, which for us will be on
January 1, 2002. We are currently evaluating what the effects of adopting SFAS
142 will be on our financial position and results of operations.

                               The Alaska Economy

We offer voice and data telecommunication and video services to customers
primarily throughout Alaska. As a result 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. In fiscal 2001 the state's
preliminary final results indicate that Alaska's oil revenues and federal
funding supplied 44% and 35%, respectively, of the state's total revenues.
Investment earning supplied only 0.2% of the state's total revenues in fiscal
2001 due to the recent decline in stock market investments. All of the federal
funding is dedicated for specific purposes, however, leaving oil revenues as the
primary funding source of general operating expenditures. In fiscal 2002 the
state forecasts that Alaska's investment earnings, federal funding and oil
revenues will supply 31%, 28% and 27%, respectively, of the state's total
projected revenues.

The volume of oil transported by the TransAlaska Oil Pipeline System ("TAPS")
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 1.0 million barrels produced per day in fiscal 2001. The state forecasts the
production of 1.1 million barrels per day in fiscal 2002. The state continues to
forecast a temporary reversal of the production rate decline through fiscal 2006
due to new developments at the Alpine, Nanuq, Northstar and Meltwater fields and
new Prudhoe Bay satellite production.

Market prices for North Slope oil averaged $27.92 in fiscal 2001 and is
forecasted to average $24.54 in fiscal 2002. The state forecasts the average
price of North Slope oil to decline to $21.41 in fiscal 2003. The closing price
per barrel was $25.08 on August 6, 2001.

                                       28
<PAGE>
The state believes the crude oil demand growth will slow in 2001 and 2002 as the
result of slower economic growth and in response to the higher energy prices of
the past two years. The state also believes that much of the current volatility
in oil prices revolves around the issue of whether or not the Organization of
Petroleum Exporting Countries ("OPEC") takes steps to increase or decrease
production. The production policy of OPEC and its ability to continue to act in
concert represents a key uncertainty in the state's revenue forecast.

The state of Alaska maintains the Constitutional Budget Reserve Fund that is
intended to fund budgetary shortfalls. If the state's current projections are
realized, the Constitutional Budget Reserve Fund will be depleted in 2005. 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.

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. Funds from federal sources of $1.8 billion are expected to be
distributed to the state of Alaska for highways and other federally supported
projects in fiscal 2001.

Should new oil discoveries or developments not materialize or the price of oil
return to its prior depressed levels, the long term trend of continued decline
in oil production from the Prudhoe Bay field 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.

The increase in residential and commercial natural gas prices and shortages in
California during the past year, in particular, have resulted in a renewed
effort to allow exploration and development in the Arctic National Wildlife
Refuge ("ANWR"). On August 2, 2001 the U.S. House of Representatives voted in
favor of opening ANWR and now the bill must go before the Senate. Deployment of
a natural gas pipeline from 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.

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
627,000 people. 42% of the State's population is located in the Municipality of
Anchorage, 13% is located in the Fairbanks North Star Borough, and 5% is located
in the City and Borough of Juneau. The rest is spread out over the vast reaches
of Alaska. No assurance can be given that the driving forces in the Alaska
economy, and in particular, oil production, will continue at 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.

                                       29
<PAGE>
                                   Seasonality

Our long-distance revenues have historically been highest in the summer months
as a result of temporary population increases attributable to tourism and
increased seasonal economic activity such as construction, commercial fishing,
and oil and gas activities. Our cable television revenues, on the other hand,
are higher in the winter months because consumers tend to watch more television,
and spend more time at home, during these months. Our local service and Internet
operations are not expected to exhibit significant seasonality, with the
exception of SchoolAccess(TM) Internet services that are reduced during the
summer months. Our ability to implement construction projects is also reduced
during the winter months because of cold temperatures, snow and short daylight
hours.


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 Senior Holdings Loan carries interest rate risk. Amounts borrowed under this
Agreement bear interest at either Libor plus 1.0% to 2.5%, depending on the
leverage ratio of Holdings and certain of its subsidiaries, or at the greater of
the prime rate or the federal funds effective rate (as defined) plus 0.05%, in
each case plus an additional 0.0% to 1.375%, depending on the leverage ratio of
Holdings and certain of its subsidiaries. Should the Libor rate, the lenders'
base rate or the leverage ratios change, our interest expense will increase or
decrease accordingly. As of June 30, 2001, we have borrowed $82.7 million
subject to interest rate risk. On this amount, a 1% increase in the interest
rate would cost us $827,000 in additional gross interest cost on an annualized
basis.

On January 3, 2001 we entered into an interest rate swap agreement to convert
$50 million in 9.75% fixed rate debt to a variable interest rate equal to the 90
day Libor rate plus 334 basis points. The swap agreement carries interest rate
risk. Should the Libor rate change, our interest expense will increase or
decrease accordingly. A 1% change in the variable interest rate will change the
annualized benefit of the swap by $500,000. As of June 30, 2001, the interest
rate spread between the fixed and swapped variable rate is 2.096%, an annualized
reduction in interest expense of approximately $1,048,000. As of August 1, 2001,
the interest rate spread between the fixed and swapped variable rate is 2.731%,
an annualized reduction in interest expense of approximately $1,365,000.

Our Fiber Facility carries interest rate risk. Amounts borrowed under this
Agreement bear interest at either Libor plus 2.5%-2.75%, or at our choice, the
lender's prime rate plus 1.25%-1.5%. Should the Libor rate, the lenders' base
rate or the leverage ratios change, our interest expense will increase or
decrease accordingly. As of June 30, 2001, we have borrowed $60.0 million
subject to interest rate risk. On this amount, a 1% increase in the interest
rate would cost us $600,000 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 June 30, 2001, we have borrowed $47.0 million subject to interest rate
risk. On this amount, a 1% increase in the interest rate would cost us $470,000
in additional gross interest cost on an annualized basis.

                                       30
<PAGE>
PART II.   OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS

Information regarding pending legal proceedings to which we are a party is
included in note 5 to the Interim Condensed Consolidated Financial Statements
and is incorporated herein by reference.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)  Exhibits:

                Exhibit 99.28 - The Bylaws of Potter View Development Co., Inc.

                Exhibit 99.29 - The Articles of Incorporation of Potter View
                                Development Co., Inc.

           (b)  Reports on Form 8-K filed during the quarter ended June 30, 2001
                - None

                                       31
<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.
<TABLE>
<CAPTION>


                                                   GCI, INC.

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

/s/                                         President and Director                           August 10, 2001
--------------------------------------      (Principal Executive Officer)                 ----------------------
Ronald A. Duncan

/s/                                         Vice President and Director                      August 10, 2001
--------------------------------------                                                    ----------------------
G. Wilson Hughes

/s/                                         Secretary, Treasurer and Director                August 10, 2001
--------------------------------------      (Principal Financial and Accounting           ----------------------
John M. Lowber                              Officer)

</TABLE>


                                       32