As filed with the Securities and Exchange Commission on August 10, 2006

                                  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, 2006

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
          For the transition period from             to

                           Commission File No. 0-5890

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

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

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

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

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and larger accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one).

Large accelerated filer [ ]  Accelerated filer [ ]  Non-accelerated filer [X]

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

                                       1
<PAGE>
<TABLE>
                                                GCI, INC.
                          A WHOLLY OWNED SUBSIDIARY OF GENERAL COMMUNICATION, INC.
                                                FORM 10-Q
                                  FOR THE QUARTER ENDED JUNE 30, 2006

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

PART I.  FINANCIAL INFORMATION

         Item l.    Financial Statements
                    Consolidated Balance Sheets as of June 30, 2006
                     (unaudited) and December 31, 2005....................................................4

                    Consolidated Statements of Operations for the
                       three and six months ended June 30, 2006 (unaudited)
                       and 2005 (unaudited)...............................................................6

                    Consolidated Statements of Stockholder's Equity
                       for the three and six months ended June 30, 2006
                       (unaudited) and 2005 (unaudited)...................................................7

                    Consolidated Statements of Cash Flows for the six
                       months ended June 30, 2006 (unaudited)
                       and 2005 (unaudited)...............................................................8

                    Notes to Interim Condensed Consolidated Financial
                       Statements (unaudited).............................................................9

         Item 2.    Management's Discussion and Analysis of Financial
                    Condition and Results of Operations...................................................27

         Item 3.    Quantitative and Qualitative Disclosures About
                    Market Risk...........................................................................53

         Item 4.    Controls and Procedures...............................................................53

PART II.  OTHER INFORMATION

         Item 1.    Legal Proceedings.....................................................................54

         Item 6.    Exhibits..............................................................................55

         Other items are omitted, as they are not applicable.

SIGNATURES................................................................................................56
</TABLE>
                                       2
<PAGE>
            Cautionary Statement Regarding Forward-Looking Statements


You should carefully review the information contained in this Quarterly Report,
but should particularly consider any risk factors that we set forth in this
Quarterly Report and in other reports or documents that we file from time to
time with the Securities and Exchange Commission ("SEC"). In this Quarterly
Report, in addition to historical information, we state our future strategies,
plans, objectives or goals and our beliefs of future events and of our future
operating results, financial position and cash flows. In some cases, you can
identify those so-called "forward-looking statements" by words such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "project," or "continue" or the negative of those words
and other comparable words. All forward-looking statements involve known and
unknown risks, uncertainties and other important factors that may cause our
actual results, performance, achievements, plans and objectives to differ
materially from any future results, performance, achievements, plans and
objectives expressed or implied by these forward-looking statements. In
evaluating those statements, you should specifically consider various factors,
including those outlined below. Those factors may cause our actual results to
differ materially from any of our forward-looking statements. For these
statements, we claim the protection of the safe harbor for forward-looking
statements provided by the Private Securities Litigation Reform Act of 1995.
Such risks, uncertainties and other factors include but are not limited to those
identified under "Risk Factors" in our December 31, 2005 annual report on Form
10-K, including in conjunction with the forward-looking statements included in
this Quarterly Report.

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

                                       3
<PAGE>
PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                               CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Amounts in thousands)                                                                            (Unaudited)
                                                                                                    June 30,        December 31,
                            ASSETS                                                                    2006              2005
------------------------------------------------------------------------------------------    ------------------- ----------------

<S>                                                                                          <C>                      <C>
Current assets:
  Cash and cash equivalents                                                                  $       42,647            44,362
                                                                                              ------------------- ----------------

  Receivables                                                                                        80,731            78,279
  Less allowance for doubtful receivables                                                             5,550             5,317
                                                                                              ------------------- ----------------
     Net receivables                                                                                 75,181            72,962

  Deferred income taxes, net                                                                         20,801            19,596
  Prepaid expenses                                                                                    6,286             8,347
  Inventories                                                                                         2,881             1,556
  Notes receivable from related parties                                                               2,685               922
  Property held for sale                                                                              2,315             2,312
  Other current assets                                                                                5,938             2,572
                                                                                              ------------------- ----------------
     Total current assets                                                                           158,734           152,629
                                                                                              ------------------- ----------------

Property and equipment in service, net of depreciation                                              434,847           453,008
Construction in progress                                                                             24,306             8,337
                                                                                              ------------------- ----------------
     Net property and equipment                                                                     459,153           461,345
                                                                                              ------------------- ----------------

Cable certificates                                                                                  191,565           191,565
Goodwill                                                                                             42,181            42,181
Other intangible assets, net of amortization                                                          7,813             6,201
Deferred loan and senior notes costs, net of amortization of $1,953 and $1,451 at
  June 30, 2006 and December 31, 2005, respectively                                                   7,509             8,011
Notes receivable from related parties                                                                    84             2,544
Other assets                                                                                          8,143             9,299
                                                                                              ------------------- ----------------
     Total other assets                                                                             257,295           259,801
                                                                                              ------------------- ----------------
       Total assets                                                                          $      875,182           873,775
                                                                                              =================== ================
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.

                                       4                             (Continued)
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                               CONSOLIDATED BALANCE SHEETS
                                                       (Continued)
<CAPTION>
(Amounts in thousands)                                                                            (Unaudited)
                                                                                                    June 30,        December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY                                                                  2006              2005
------------------------------------------------------------------------------------------    ------------------ -----------------

<S>                                                                                          <C>                     <C>
Current liabilities:
  Current maturities of obligations under long-term debt and capital leases                  $        1,894             1,769
  Accounts payable                                                                                   26,640            23,217
  Deferred revenue                                                                                   15,139            16,439
  Accrued payroll and payroll related obligations                                                    13,176            17,925
  Accrued interest                                                                                    8,703             9,588
  Accrued liabilities                                                                                 6,759             6,814
  Subscriber deposits                                                                                   408               361
                                                                                              ------------------ -----------------
    Total current liabilities                                                                        72,719            76,113

Long-term debt                                                                                      473,360           474,115
Obligation under capital lease, excluding current maturity                                            1,192               ---
Obligation under capital lease due to related party, excluding current maturity                         597               628
Deferred income taxes, net of deferred income tax benefit                                            77,955            69,753
Other liabilities                                                                                    12,146             9,546
                                                                                              ------------------ -----------------
    Total liabilities                                                                               637,969           630,155
                                                                                              ------------------ -----------------
Stockholder's equity:
 Class A common stock (no par). Authorized 10 shares; issued .01 shares at
   June 30, 2006 and December 31, 2005                                                              206,622           206,622
 Paid-in capital                                                                                     20,623            10,840
 Retained earnings                                                                                    9,968            26,158
                                                                                              ------------------ -----------------
    Total stockholder's equity                                                                      237,213           243,620
                                                                                              ------------------ -----------------
Commitments and contingencies
    Total liabilities and stockholder's equity                                               $      875,182           873,775
                                                                                              ================== =================
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.

                                       5
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                        (Unaudited)
<CAPTION>
                                                                               Three Months Ended           Six Months Ended
                                                                                    June 30,                    June 30,
(Amounts in thousands)                                                          2006        2005            2006        2005
                                                                            ----------- ------------    ----------- ------------

<S>                                                                        <C>            <C>             <C>         <C>
Revenues                                                                   $  118,220     110,665         231,042     217,175

Cost of goods sold (exclusive of depreciation and
 amortization shown separately below)                                          38,598      36,045          74,782      71,245
Selling, general and administrative expenses                                   40,667      38,019          80,281      75,199
Bad debt expense (recovery)                                                     1,338         194           1,839        (159)
Depreciation and amortization expense                                          20,172      18,348          40,333      36,052
                                                                            ----------- ------------    ----------- ------------
     Operating income                                                          17,445      18,059          33,807      34,838
                                                                            ----------- ------------    ----------- ------------
Other income (expense):
 Interest expense                                                              (8,696)     (8,403)        (17,250)    (16,735)
 Amortization of loan and senior notes fees                                      (251)       (448)           (502)       (931)
 Interest income                                                                  482         112             639         291
 Other                                                                            282         ---             169         ---
                                                                            ----------- ------------    ----------- ------------
     Other expense, net                                                        (8,183)     (8,739)        (16,944)    (17,375)
                                                                            ----------- ------------    ----------- ------------
     Net income before income taxes and cumulative effect
       of a change in accounting principle                                      9,262       9,320          16,863      17,463
Income tax expense                                                              3,856       4,036           7,535       7,516
                                                                            ----------- ------------    ----------- ------------
     Net income before cumulative effect of a change in
       accounting principle                                                     5,406       5,284           9,328       9,947

Cumulative effect of a change in accounting principle,
 net of income tax benefit of $425                                                ---         ---            (608)        ---
                                                                            ----------- ------------    ----------- ------------
     Net income                                                            $    5,406       5,284           8,720       9,947
                                                                            =========== ============    =========== ============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.

                                       6
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                                         SIX MONTHS ENDED JUNE 30, 2006 AND 2005
                                                       (Unaudited)
<CAPTION>
                                                        Shares of
                                                        Class A      Class A
                                                         Common      Class A       Paid-in   Retained
(Amounts in thousands, except share amounts)              Stock    Common Stock    Capital   Earnings      Total
                                                       ------------------------------------------------------------
<S>                                                        <C>      <C>             <C>       <C>         <C>
Balances at December 31, 2004                              100      $ 206,622        5,677     16,305     228,604
Net income                                                 ---            ---          ---      9,947       9,947
Net distribution to General Communication, Inc.            ---            ---       (5,677)    (3,144)     (8,821)
                                                       ------------------------------------------------------------
  Balances at June 30, 2005                                100      $ 206,622          ---     23,108     229,730
                                                       ============================================================

Balances at December 31, 2005                              100      $ 206,622       10,840     26,158     243,620
Net income                                                 ---            ---          ---      8,720       8,720
Distribution to General Communication, Inc.                ---            ---          ---    (24,910)    (24,910)
Contribution from General Communication, Inc.              ---            ---        9,783        ---       9,783
                                                       ------------------------------------------------------------
   Balances at June 30, 2006                               100      $ 206,622       20,623      9,968     237,213
                                                       ============================================================
</TABLE>

                                       7
<PAGE>
<TABLE>
                                                GCI, INC. AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          SIX MONTHS ENDED JUNE 30, 2006 AND 2005
                                                        (Unaudited)
<CAPTION>
(Amounts in thousands)                                                                     2006              2005
                                                                                      --------------    -------------
<S>                                                                                  <C>                  <C>
Cash flows from operating activities:
   Net income                                                                        $     8,720             9,947
   Adjustments to reconcile net income to net cash provided by operating
     activities, net of acquisition:
     Depreciation and amortization expense                                                40,333            36,052
     Deferred income tax expense                                                           7,409             7,516
     Share-based compensation expense                                                      2,260                96
     Cumulative effect of a change in accounting principle, net                              608               ---
     Amortization of loan and senior notes fees                                              502               931
     Deferred compensation                                                                   239               449
     Bad debt expense                                                                        233               172
     Loss on disposal of property and equipment                                               19               459
     Other noncash income and expense items                                                  468               598
     Change in operating assets and liabilities                                           (7,068)           (8,299)
                                                                                      --------------    -------------
       Net cash provided by operating activities                                          53,723            47,921
                                                                                      --------------    -------------
Cash flows from investing activities:
   Purchases of property and equipment                                                   (35,219)          (47,690)
   Purchases of other assets and intangible assets                                        (3,133)           (2,021)
   Notes receivable payments from related parties                                            649               ---
   Notes receivable issued to related parties                                                (55)              (13)
   Net cash acquired in business combination                                                  52               ---
   Additions to property held for sale                                                        (3)             (191)
   Proceeds from sales of assets                                                             ---               445
                                                                                      --------------    -------------
       Net cash used in investing activities                                             (37,709)          (49,470)
                                                                                      --------------    -------------
Cash flows from financing activities:
   Net distribution to General Communication, Inc.                                        (16,784)           (9,021)
   Repayment of Senior Credit Facility                                                       (925)              ---
   Repayments of capital lease obligations                                                    (20)           (3,171)
   Payment of debt issuance costs                                                             ---               (86)
                                                                                      --------------    -------------
       Net cash used in financing activities                                              (17,729)          (12,278)
                                                                                      --------------    -------------
       Net decrease in cash and cash equivalents                                           (1,715)          (13,827)
       Cash and cash equivalents at beginning of period                                    44,362            31,452
                                                                                      --------------    -------------
       Cash and cash equivalents at end of period                                    $     42,647            17,625
                                                                                      ==============    =============
See accompanying notes to interim condensed consolidated financial statements.
</TABLE>

                                       8
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

The accompanying unaudited interim condensed consolidated financial statements
include the accounts of GCI, Inc. and its subsidiaries and have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. They should be read in
conjunction with our audited consolidated financial statements for the year
ended December 31, 2005, filed as part of our annual report on Form 10-K. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The results of
operations for interim periods are not necessarily indicative of the results
that may be expected for an entire year or any other period.

(l)    Business and Summary of Significant Accounting Principles

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

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

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

       (b)   Principles of Consolidation
             The consolidated financial statements include the consolidated

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

             accounts of GCI, Inc. and its wholly owned subsidiaries with all
             significant intercompany transactions eliminated.

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

       (d)   Asset Retirement Obligations
             Following is a reconciliation of the beginning and ending aggregate
             carrying amount of our asset retirement obligations at June 30,
             2006 and 2005 (amounts in thousands):
<TABLE>
<CAPTION>
                    <S>                                                           <C>
                    Balance at December 31, 2004                                    $  2,971
                    Accretion expense for the six months ended June 30, 2005              99
                                                                                     --------
                         Balance at June 30, 2005                                   $  3,070
                                                                                     ========

                    Balance at December 31, 2005                                    $  3,210
                    Accretion expense for the six months ended June 30, 2006              86
                    Liability settled                                                     (4)
                                                                                     --------
                         Balance at June 30, 2006                                   $  3,292
                                                                                     ========
</TABLE>
             Our asset retirement obligations are included in Other Liabilities.

       (e)   Share-based Payment Arrangements
             Effective January 1, 2006, we adopted the provisions of SFAS No.
             123(R), "Share-Based Payment," and related interpretations, to
             account for share-based compensation using the modified prospective
             transition method and therefore will not restate our prior period
             results. SFAS 123(R) supersedes Accounting Principles Board ("APB")
             Opinion No. 25, "Accounting for Stock Issued to Employees" and
             revises guidance in SFAS 123, "Accounting for Stock-Based
             Compensation." Among other things, SFAS 123(R) requires that
             compensation expense be recognized in the financial statements for
             share-based awards based on the grant date fair value of those
             awards. The modified prospective transition method applies to (a)
             unvested stock options under our 1986 Stock Option Plan ("Option
             Plan") and unvested stock options not issued pursuant to a plan
             that were outstanding as of December 31, 2005 based on the grant
             date fair value estimated in accordance with the pro forma
             provisions of SFAS 123, and (b) any new share-based awards granted
             subsequent to December 31, 2005, based on the grant-date fair value
             estimated in accordance with the provisions of SFAS 123(R).
             Additionally, share-based compensation expense includes an estimate
             for pre-vesting forfeitures and is recognized over the requisite
             service periods of the awards on a straight-line basis, which is
             generally commensurate with the vesting term. We have recorded
             $2,260,000 of share-based compensation expense, net of estimated
             forfeitures, during the six months ended June 30, 2006 as a result
             of our adoption of SFAS 123(R). See note 4 for information on the
             assumptions we used to calculate the fair value of share-based
             compensation.

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

             Prior to January 1, 2006, we accounted for all of our stock option
             agreements in accordance with APB No. 25 and related
             interpretations. Accordingly, compensation expense for a stock
             option grant was recognized only if the exercise price was less
             than the market value of GCI's common stock on the grant date.
             Prior to our adoption of SFAS 123(R), as required under the
             disclosure provisions of SFAS 123, as amended, we provided pro
             forma net income for each period as if we had applied the fair
             value method to measure share-based compensation 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 an income tax payment and
             refund reflects the consolidated group's activity. SFAS 123(R)
             requires the benefits associated with tax deductions in excess of
             recognized compensation cost to be reported as a financing cash
             flow rather than as an operating cash flow as previously required.

             The table below shows the effect of adopting SFAS No. 123(R) on
             selected items and what those items would have been under previous
             guidance under APB No. 25 and SFAS No. 123 for the six months ended
             June 30, 2006 (amounts in thousands):
<TABLE>
<CAPTION>
                                                                                              Under APB No.    Under SFAS
                                                                              As Reported          25              123
                                                                            --------------- ---------------- ---------------
             <S>                                                           <C>                  <C>              <C>
             Operating income                                              $     33,807          35,966           33,807
             Net income before income taxes and cumulative effect of a
               change in accounting principle                                    16,863          19,022           16,863
             Cumulative effect of a change in accounting principle,
               net of income tax benefit of $425                                   (608)            ---              ---
             Net income                                                           8,720          10,599            9,328
             Cash flow from operating activities (1)                             54,073          54,073           54,073
             Cash flow from financing activities (1)                            (15,133)        (15,133)         (15,133)
</TABLE>
           ----------------------------
           (1) For the six months ended June 30, 2006, we did not record any
               excess tax benefit generated from stock option exercises since we
               are in a net operating loss position and the income tax deduction
               will not yet reduce income taxes payable.
           ----------------------------

             The table below summarizes the impact on our results of operations
             for the six months ended June 30, 2006 of outstanding stock options
             recognized under the provisions of SFAS 123(R) (amounts in
             thousands):

                                                                       2006
                                                                   -----------
                Share-based employee compensation expense         $   2,260
                Income tax benefit                                      929
                                                                   -----------
                   Net decrease in income                         $   1,331
                                                                   ===========

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

             The following illustrates the effect on net income for the six
             months ended June 30, 2005 as if we had applied the fair value
             method to measure share-based compensation, as required under the
             disclosure provisions of SFAS No. 123 (amounts in thousands):
<TABLE>
<CAPTION>
                                                                                   Three Months           Six Months
                                                                                  Ended June 30,        Ended June 30,
                                                                                       2005                  2005
                                                                                 -----------------    ------------------
                <S>                                                             <C>                          <C>
                Net income, as reported                                         $      5,229                 9,799
                 Total share-based employee compensation expense included
                   in reported net income, net of related tax effects                     48                    96
                 Less share-based employee compensation expense determined
                   under the SFAS 123 fair value method, net of related
                   tax effects                                                          (401)                 (911)
                                                                                 -----------------    ------------------
                     Pro forma net income                                       $      4,876                 8,984
                                                                                 =================    ==================
</TABLE>
       (f)   Exchanges of Nonmonetary Assets
             The cost of a nonmonetary asset or service acquired in exchange for
             another nonmonetary asset or service is based upon the fair value
             of the asset surrendered to obtain it unless the fair value is not
             determinable, the exchange of a product or property held for sale
             in the ordinary course of business for a product or property to be
             sold in the same line of business to facilitate sales to customers
             other than the parties to the exchange, or the exchange lacks
             commercial substance. If the exceptions apply we value the
             transaction using the recorded amount (after reduction, if
             appropriate, for an indicated impairment of value) of the
             nonmonetary asset or service relinquished. A gain or loss may be
             recognized on the exchange.

       (g)   Rental Costs Incurred During a Construction Period
             We recognize rental costs associated with ground or building
             operating leases that are incurred during a construction period as
             rental expense in income from continuing operations.

       (h)   Reporting of Accounting Changes and Error Corrections
             On January 1, 2006, we adopted SFAS 154, "Accounting Changes and
             Error Corrections--a replacement of APB Opinion No. 20 and
             Financial Accounting Standards Board ("FASB") Statement No. 3."
             SFAS 154 replaces APB Opinion No. 20, "Accounting Changes," and
             FASB Statement No. 3, "Reporting Accounting Changes in Interim
             Financial Statements," and changes the requirements for the
             accounting for and reporting of a change in accounting principle.
             SFAS 154 applies to all voluntary changes in accounting principle.
             It also applies to changes required by an accounting pronouncement
             in the unusual instance that the pronouncement does not include
             specific transition provisions. When a pronouncement includes
             specific transition provisions, those provisions should be
             followed.

       (i)   New Accounting Pronouncements
             In June 2006, the FASB issued Emerging Issues Task Force ("EITF")
             Issue No. 06-03, "How Taxes Collected from Customers and Remitted

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

             to Governmental Authorities Should Be Presented in the Income
             Statement (That Is, Gross versus Net Presentation)" which includes
             any tax assessed by a governmental authority that is directly
             imposed on a revenue-producing transaction between a seller and a
             customer and may include, but is not limited to, sales, use, value
             added, and some excise taxes. EITF No. 06-03 states that the
             presentation of taxes within its scope on either a gross (included
             in revenues and costs) or a net (excluded from revenues) basis is
             an accounting policy decision that should be disclosed in a
             company's financial statements. In addition, for any such taxes
             that are reported on a gross basis, a company should disclose the
             amounts of those taxes in interim and annual financial statements
             for each period for which an income statement is presented if those
             amounts are significant. The disclosure of those taxes can be done
             on an aggregate basis. We will begin application of EITF No. 06-03
             on January 1, 2007 and do not expect it to have a material effect
             on our results of operations, financial position and cash flows.

             In July 2006, the FASB issued FASB Interpretation ("FIN") 48,
             "Accounting for Uncertainty in Income Taxes" which clarifies the
             accounting for uncertainty in income taxes recognized in an
             enterprise's financial statements in accordance with FASB Statement
             No. 109, "Accounting for Income Taxes." FIN 48 prescribes a
             recognition threshold and measurement attribute for the financial
             statement recognition and measurement of a tax position taken or
             expected to be taken in a tax return. FIN 48 also provides guidance
             on derecognition, classification, interest and penalties,
             accounting in interim periods, disclosure, and transition. We will
             begin application of FIN 48 on January 1, 2007 and do not expect it
             to have a material effect on our results of operations, financial
             position, and cash flows.

       (j)   Reclassifications
             Reclassifications have been made to the 2005 financial statements
             to make them comparable with the 2006 presentation.

(2)    Consolidated Statements of Cash Flows Supplemental Disclosures
       Changes in operating assets and liabilities, net of acquisition, consist
       of (amounts in thousands):
<TABLE>
<CAPTION>
             Six month periods ended June 30,                                  2006           2005
                                                                           ------------   ------------
              <S>                                                         <C>                <C>
              Increase in accounts receivable                             $   (2,591)        (3,130)
              Decrease in prepaid expenses                                       521            696
              Increase in inventories                                         (1,325)          (284)
              (Increase) decrease in other current assets                     (1,255)           137
              Increase (decrease) in accounts payable                          3,309           (437)
              Decrease in deferred revenues                                   (1,300)        (1,106)
              Increase (decrease) in accrued payroll and payroll
                 related obligations                                          (4,749)           546
              Decrease in due to related party                                   ---         (5,432)
              Increase in accrued liabilities                                    883            190
              Decrease in accrued interest                                      (885)           (23)
              Increase (decrease) in subscriber deposits                          47            (48)
              Increase in components of other long-term liabilities              277            592
                                                                           ------------   ------------
                                                                          $   (7,068)        (8,299)
                                                                           ============   ============
</TABLE>
                                       13                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

       We paid interest totaling approximately $18.0 million and $16.7 million
       during the six months ended June 30, 2006 and 2005, respectively.

       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 an income tax payment and refund reflects the consolidated
       group's activity. Income tax refunds received totaled $0 and $202,000
       during the six months ended June 30, 2006 and 2005, respectively. We paid
       income taxes of $76,000 and $100,000 during the six months ended June 30,
       2006 and 2005, respectively.

       We recorded a net cumulative effect adjustment (expense) of $672,000
       during the six months ended June 30, 2006 to recognize the effect of
       initially measuring share-based compensation liability instruments at
       fair value. We recorded a net cumulative effect adjustment (benefit) of
       $64,000 during the six months ended June 30, 2006 for share-based
       compensation instruments outstanding at December 31, 2005 for which the
       requisite service is not expected to be rendered. We recorded $104,000
       during the six months ended June 30, 2005 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, 2006 we financed a $1.2 million
       acquisition of a building through a capital lease obligation.

(3)    Intangible Assets
       There have been no events or circumstances that indicate the
       recoverability of the carrying amounts of indefinite-lived and
       definite-lived intangible assets has changed as of June 30, 2006. The
       remaining useful lives of our cable certificates and goodwill were
       evaluated as of June 30, 2006 and events and circumstances continue to
       support an indefinite useful life. We reviewed the useful lives assigned
       to our definite-lived intangible assets and believe the lives continue to
       be appropriate as of June 30, 2006.

       Cable certificates and goodwill are not allocated to a reportable segment
       but are included in the All Other category of our segment assets.

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

       Amortization expense for amortizable intangible assets was as follows
       (amounts in thousands):
<TABLE>
<CAPTION>
                                          Three Months Ended              Six Months Ended
                                               June 30,                       June 30,
                                          2006           2005             2006         2005
                                     -------------- -------------    ------------- ------------
             <S>                    <C>                   <C>              <C>          <C>
             Amortization expense   $      399            313              788          605
                                     ============== =============    ============= ============
</TABLE>
       Amortization expense for amortizable intangible assets for each of the
       five succeeding fiscal years is estimated to be (amounts in thousands):

                 Years Ending
                 December 31,
             -------------------
                     2006           $ 1,626
                     2007             1,538
                     2008             1,287
                     2009               963
                     2010               442

(4)    Share-Based Compensation
       GCI's 1986 Stock Option Plan, as amended, provides for the grant of
       options for a maximum of 13.2 million shares of GCI Class A common stock,
       subject to adjustment upon the occurrence of stock dividends, stock
       splits, mergers, consolidations or certain other changes in corporate
       structure or capitalization. If an option expires or terminates, the
       shares subject to the option will be available for further grants of
       options under the Option Plan. Substantially all stock options granted
       vest in equal installments over a period of five years, and expire ten
       years from the date of grant. New shares are issued when stock option
       agreements are exercised, unless the stock option agreements are settled
       in cash. Our share repurchase program on behalf of GCI as described Part
       1, Item 2 below may include the purchase of shares issued pursuant to
       stock option agreement exercise transactions. We are unable to estimate
       the number of such shares we may purchase during the annual period
       beginning July 1, 2006.

       We use a Black-Scholes-Merton option pricing model to estimate the fair
       value of share-based awards under SFAS 123(R), which is the same
       valuation technique we previously used for pro forma disclosures under
       SFAS 123. The Black-Scholes-Merton option pricing model incorporates
       various and highly subjective assumptions, including expected term and
       expected volatility. We have reviewed our historical pattern of option
       exercises and have determined that meaningful differences in option
       exercise activity existed among employee job categories. Therefore, for
       all stock options granted after January 1, 2006, we have categorized
       these awards into two groups of employees for valuation purposes, which
       is the same technique we previously used for pro forma disclosures under
       SFAS 123.

        We estimated the expected term of options granted by evaluating the
        vesting period of stock option awards, employee's past exercise and
        post-vesting employment departure behavior, and expected volatility of
        the price of the underlying shares.

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

        We estimated the expected volatility of GCI's common stock at the grant
        date using the historical volatility of its common stock over the most
        recent period equal to the expected stock option term and evaluated the
        extent to which available information indicated that future volatility
        may differ from historical volatility.

        The risk-free interest rate assumption was determined using the Federal
        Reserve nominal rates for U.S. Treasury zero-coupon bonds with
        maturities similar to those of the expected term of the award being
        valued. GCI has never paid any cash dividends on its common stock and
        does not anticipate paying any cash dividends in the foreseeable future.
        Therefore, we assumed an expected dividend yield of zero.

        The following table shows our assumptions used to compute the
        share-based compensation expense and pro forma information for stock
        options granted during the six months ended June 30, 2006 and 2005:

                                               2006                 2005
                                        ------------------- --------------------
            Expected term (years)            5.0 - 5.9            5.0 - 5.2
            Volatility                     54.7% - 57.6%        44.8% - 45.5%
            Risk-free interest rate         4.8% - 5.1%          3.7% - 4.2%

        SFAS 123(R) requires us to measure share-based compensation liability
        instruments at fair value as of January 1, 2006. Previously, we measured
        those liability instruments at their intrinsic value determined as of
        their grant date. The transition impact of adopting SFAS No. 123(R)
        attributed to measuring such liability instruments at fair value totaled
        approximately $1.1 million, net of income tax benefit of $469,000 and is
        reported as a component of the cumulative effect of a change in
        accounting principle in the accompanying Consolidated Statement of
        Operations for the six months ended June 30, 2006.

        Additionally, SFAS 123(R) requires us to estimate pre-vesting option
        forfeitures at the time of grant and periodically revise those estimates
        in subsequent periods if actual forfeitures differ from those estimates.
        We record share-based compensation expense only for those awards
        expected to vest using an estimated forfeiture rate based on our
        historical pre-vesting forfeiture data. Previously, we accounted for
        forfeitures as they occurred under the pro forma disclosure provisions
        of SFAS 123 for periods prior to 2006. The transition impact of adopting
        SFAS No. 123(R), attributed to accruing for expected forfeitures on
        outstanding share-based awards, totaled $108,000, net of income tax
        expense of $44,000 and is reported as a component of the cumulative
        effect of a change in accounting principle in the accompanying
        Consolidated Statement of Operations for the six months ended June 30,
        2006.

        The weighted average grant date fair value of options granted during the
        six months ended June 30, 2006 and 2005 was $6.46 per share and $4.55
        per share, respectively. The total fair value of options vesting during
        the six months ended June 30, 2006 and 2005 was approximately $2.2
        million and $2.9 million, respectively.

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

        Unrecognized share-based compensation expense was approximately $12.6
        million as of June 30, 2006, relating to a total of 3.2 million unvested
        stock options. We expect to recognize this share-based compensation
        expense over a weighted average period of approximately 3.3 years.

        The following is a summary of our 1986 Stock Option Plan activity for
        the six months ended June 30, 2006:
<TABLE>
<CAPTION>
                                                                                         Weighted Average
                                                                         Shares           Exercise Price
                                                                    ----------------    -----------------
               <S>                                                    <C>                    <C>
                 Outstanding at December 31, 2005                      6,550,777              $7.27

               Granted                                                   931,950             $12.07
               Exercised                                              (1,165,692)             $6.61
               Forfeited                                                 (51,900)             $8.96
                                                                    ----------------
                 Outstanding at June 30, 2006                          6,265,135              $8.09
                                                                    ================

                 Available for grant at June 30, 2006                    440,115
                                                                    ================
</TABLE>
        The following is a summary of activity for stock options granted not
        pursuant to the 1986 Stock Option Plan for the six months ended June 30,
        2006:
<TABLE>
<CAPTION>
                                                                                         Weighted Average
                                                                         Shares           Exercise Price
                                                                    ----------------    -----------------
                 <S>                                                     <C>                  <C>
                 Outstanding at December 31, 2005 and
                    June 30, 2006                                        250,000              $6.50
                                                                    ================

                 Available for grant at June 30, 2006                        ---
                                                                    ================
</TABLE>
                                       17                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)

       The following is a summary of all outstanding stock options at June 30,
       2006:
<TABLE>
<CAPTION>
                                                 Options Outstanding
          ---------------------------------------------------------------------------------------------------
                                                   Weighted Average
                                                      Remaining                                Aggregate
                Range of                           Contractual Life      Weighted Average   Intrinsic Value
            Exercise Prices        Shares              (years)            Exercise Price      (thousands)
          ---------------------------------------------------------------------------------------------------
             <S>                 <C>                     <C>                  <C>              <C>
               $3.11-$6.00       1,013,651               4.97                  $5.49            $6,756
               $6.01-$6.35          52,000               4.53                  $6.13              $307
               $6.36-$6.50       1,287,889               4.03                  $6.50            $7,277
               $6.51-$7.00         201,234               3.69                  $7.00            $1,037
               $7.01-$7.25       1,125,000               5.69                  $7.25            $5,513
               $7.26-$8.40         691,993               5.98                  $8.01            $2,863
               $8.41-$9.75         793,520               8.36                  $9.40            $2,183
              $9.76-$11.50         976,348               9.35                 $10.88            $1,239
             $11.51-$11.95           1,000               9.75                 $11.95              $---
             $11.96-$13.11         372,500               9.92                 $13.11              $---
          ---------------------------------------------------------------------------------------------------
              $3.11-$13.11       6,515,135               6.33                  $8.03           $27,175
          ===================================================================================================

                                                    Options Vested
          ---------------------------------------------------------------------------------------------------
                                                   Weighted Average
                                                      Remaining                                Aggregate
                Range of                           Contractual Life      Weighted Average   Intrinsic Value
            Exercise Prices        Shares              (years)            Exercise Price      (thousands)
          ---------------------------------------------------------------------------------------------------
               $3.11-$6.00         701,501               4.33                  $5.31            $4,799
               $6.01-$6.35          51,200               4.50                  $6.13              $305
               $6.36-$6.50       1,185,089               3.80                  $6.50            $6,696
               $6.51-$7.00         200,834               3.69                  $7.00            $1,035
               $7.01-$7.25         549,995               5.64                  $7.25            $2,695
               $7.26-$8.40         449,293               4.94                  $7.81            $1,948
               $8.41-$9.75         129,333               6.49                  $9.02              $404
              $9.76-$11.50          53,198               6.19                 $10.79               $72
             $11.51-$11.95             ---                ---                   $---              $---
              $11.96-13.11             ---                ---                   $---             $---
          ---------------------------------------------------------------------------------------------------
              $3.11-$13.11       3,320,443               4.52                  $6.74           $17,954
          ===================================================================================================
</TABLE>
       The total intrinsic value, determined as of the date of exercise, of
       options exercised in the six months ended June 30, 2006 and 2005 were
       $5.8 million and $284,000, respectively. We received $7.7 million and
       $469,000 from GCI in cash from stock option exercises in the six months
       ended June 30, 2006 and 2005, respectively. On GCI's behalf we used cash
       of $4.9 million and $0 to settle stock option agreements in the six
       months ended June 30, 2006 and 2005, respectively.

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

(5)    Industry Segments Data
       Our reportable segments are business units that offer different products.
       The reportable segments are each managed separately and serve distinct
       types of customers.

       In the fourth quarter of 2005 we committed to a reorganization plan to
       more efficiently meet the demands of technological and product
       convergence by realigning along customer lines rather than product lines.
       Beginning January 1, 2006 our four reportable segments became Consumer,
       Network Access, Commercial and Managed Broadband, replacing the
       Long-distance, Cable, Local Access and Internet services segments.

       Reportable segment data and All Other Category data for the six months
       ended June 30, 2005 have been reclassified for comparability purposes, as
       follows:

       o   Revenue and cost of goods sold (exclusive of depreciation and
           amortization expense) ("Cost of Goods Sold") for the six months ended
           June 30, 2005 were reclassified to conform to the new segment
           organizational structure. A combination of specific identification
           and general allocations were employed to reclassify amounts for the
           six months ended June 30, 2005. Allocated amounts were generally
           determined using segment revenue or customer counts derived from
           first quarter of 2006 segment data. We believe the first quarter of
           2006 division of revenue and customers by segment is representative
           of the customer composition for the six months ended June 30, 2005
           for purposes of reclassifying revenue and Cost of Goods Sold amounts
           for the six months ended June 30, 2005.

       o   Selling, general and administrative ("SG&A") expenses for the six
           months ended June 30, 2005 were reclassified to conform to the new
           segment organizational structure. A combination of specific and
           general allocations were employed to reclassify amounts for the six
           months ended June 30, 2005, as follows:

           o      Certain SG&A expenses for the six months ended June 30, 2006
                  were directly charged to each new reportable segment. The
                  amount of comparable SG&A directly charged to each segment
                  during the six months ended June 30, 2005 based upon our new
                  organizational structure is not practicable to calculate. We
                  believe the 2006 amounts are representative of the amounts
                  allocable during the same period of 2005, and therefore
                  allocated such amounts to each reportable segment in the six
                  months ended June 30, 2005.

           o      The remaining SG&A expenses, consisting of corporate related
                  expenses further described below, were allocated to each
                  segment using the percentage of each segment's margin for the
                  year ended December 31, 2004 to total margin for the same
                  period.

       o   Bad debt recovery for the six months ended June 30, 2005 was
           reclassified to conform to the new segment organizational structure.
           A combination of specific identification and general allocations
           based upon segment revenue for the year ended December 31, 2005 were
           employed to reclassify bad debt recovery for the six months ended
           June 30, 2005.

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

       Depreciation and amortization expense for the six months ended June 30,
       2005 is no longer allocated to reportable segments as our Chief Operating
       Decision Maker now evaluates each segments' performance based upon its
       earnings from operations before depreciation, amortization, net interest
       expense and income tax expense.

       A description of our four reportable segments follows:

          Consumer. We offer a full range of voice, video, data and wireless
          services to residential customers.

          Network Access. We offer a full range of voice and data services to
          common carrier customers.

          Commercial. We offer a full range of voice, video, data and wireless
          services to business and governmental customers.

          Managed Broadband. We offer data services to rural school districts,
          rural hospitals and health clinics through our SchoolAccess(R) and
          Rural Health initiatives.

       Corporate related expenses including engineering, operations and
       maintenance of our core network, information technology, accounting,
       legal and regulatory, human resources, and other general and
       administrative expenses for the six months ended June 30, 2006 are
       allocated to our segments using segment margin for the year ended
       December 31, 2005. Bad debt expense for the six months ended June 30,
       2006 is allocated to our segments using a combination of specific
       identification and allocations based upon segment revenue for the six
       months ended June 30, 2006.

       We evaluate performance and allocate resources based on earnings from
       operations before depreciation and amortization expense, net interest
       expense and income tax expense. The accounting policies of the reportable
       segments are the same as those described in the summary of significant
       accounting policies in note 1 in the "Notes to Consolidated Financial
       Statements" included in Part II of our December 31, 2005 annual report on
       Form 10-K. Intersegment sales are recorded at cost plus an agreed upon
       intercompany profit.

       We earn all revenues through sales of services and products within the
       United States. All of our long-lived assets are located within the United
       States of America, except approximately 82% of our undersea fiber optic
       cable systems which transit international waters and all of our satellite
       transponders.

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

       Summarized financial information for our reportable segments for the
       three and six months ended June 30, 2006 and 2005 follows (amounts in
       thousands):
<TABLE>
<CAPTION>
                                                                                                            Total
                                                                 Network         Commer     Managed       Reportable
       Three months ended June 30,                Consumer        Access         -cial     Broadband       Segments
       2006                                     ---------------------------------------------------------------------
       ----
       <S>                                     <C>                <C>            <C>         <C>           <C>
       Revenues:
         Intersegment                          $      ---            ---          1,386        ---           1,386
         External                                  44,223         41,377         26,013      6,607         118,220
                                                ---------------------------------------------------------------------
            Total revenues                     $   44,223         41,377         27,399      6,607         119,606
                                                =====================================================================

       Earnings from operations before
         depreciation, amortization, net
         interest expense and income taxes     $    7,878         22,812          5,156      2,053          37,899
                                                =====================================================================

       2005
       ----
       Revenues:
         Intersegment                          $       15          1,607          6,166         39           7,827
         External                                  40,349         36,907         26,407      7,002         110,665
                                                ---------------------------------------------------------------------
            Total revenues                     $   40,364         38,514         32,573      7,041         118,492
                                                =====================================================================

       Earnings from operations before
         depreciation, amortization, net
         interest expense and income taxes     $    7,228         20,569          7,061      1,549          36,407
                                                =====================================================================
</TABLE>
                                       21                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES
          Notes to Interim Condensed Consolidated Financial Statements
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                            Total
                                                                 Network         Commer     Managed       Reportable
       Six months ended June 30,                  Consumer        Access         -cial      Broadband      Segments
       2006                                     ---------------------------------------------------------------------
       ----
       <S>                                     <C>                <C>            <C>         <C>            <C>
       Revenues:
         Intersegment                          $      ---            ---          2,724        ---           2,724
         External                                  86,886         79,200         52,141     12,815         231,042
                                                ---------------------------------------------------------------------
            Total revenues                     $   86,886         79,200         54,865     12,815         233,766
                                                =====================================================================

       Earnings from operations before
         depreciation, amortization, net
         interest expense and income taxes     $   15,955         42,681         11,812      3,861          74,309
                                                =====================================================================

       2005
       ----
       Revenues:
         Intersegment                          $       29          3,439         11,989         39          15,496
         External                                  80,541         71,051         51,766     13,817         217,175
                                                ---------------------------------------------------------------------
            Total revenues                     $   80,570         74,490         63,755     13,856         232,671
                                                =====================================================================

       Earnings from operations before
         depreciation, amortization, net
         interest expense and income taxes     $   15,181         38,849         12,725      4,135          70,890
                                                =====================================================================
</TABLE>

       A reconciliation of reportable segment revenues to consolidated revenues
       follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                          Three Months Ended            Six Months Ended
                                                               June 30,                     June 30,
                                                         2006           2005           2006          2005
                                                    -------------- -------------- ------------- --------------

         <S>                                       <C>                <C>            <C>           <C>
         Reportable segment revenues               $   119,606        118,492        233,766       232,671
         Less intersegment revenues eliminated
           in consolidation                              1,386          7,827          2,724        15,496
                                                    -------------- -------------- ------------- --------------
              Consolidated revenues                $   118,220        110,665        231,042       217,175
                                                    ============== ============== ============= ==============
</TABLE>

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

       A reconciliation of reportable segment earnings from operations before
       depreciation and amortization expense, net interest expense and income
       taxes to consolidated net income before income taxes and cumulative
       effect of a change in accounting principle follows (amounts in
       thousands):
<TABLE>
<CAPTION>
                                                              Three Months Ended          Six Months Ended
                                                                   June 30,                  June 30,
                                                              2006         2005          2006         2005
                                                          ------------ ------------ ------------- ------------
         <S>                                             <C>              <C>           <C>          <C>
         Reportable segment earnings from operations
           before depreciation and amortization
           expense, net interest expense and income
           taxes                                         $   37,899       36,407        74,309       70,890
         Less depreciation and amortization expense          20,172       18,348        40,333       36,052
         Less other income                                      282          ---           169          ---
                                                          ------------ ------------ ------------- ------------
              Consolidated operating income                  17,445       18,059        33,807       34,838
         Less other expense, net                              8,183        8,739        16,944       17,375
                                                          ------------ ------------ ------------- ------------
              Consolidated net income before income
                taxes and cumulative effect of a
                change in accounting principle           $    9,262        9,320        16,863       17,463
                                                          ============ ============ ============= ============
</TABLE>
(6)    Commitments and Contingencies

       Litigation, Disputes, and Regulatory Matters
       We are involved in various other lawsuits, billing disputes, legal
       proceedings, and regulatory matters that have arisen from time to time 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 liquidity.

       Capital Lease Obligation
       On March 31, 2006, through our subsidiary GCI Communication Corp. ("GCC")
       we entered into an agreement to lease transponder capacity on Intelsat,
       Ltd.'s ("Intelsat" acquired PanAmSat Corporation on June 30, 2006) Galaxy
       18 spacecraft that is expected to be launched during 2007. We will also
       lease capacity on the Horizons 1 satellite, which is owned jointly by
       Intelsat and JSAT International, Inc. The leased capacity is expected to
       replace our existing transponder capacity on Intelsat's Galaxy 10R
       satellite when it reaches its end of life.

       We will lease, subject to a termination option, C-band and Ku-Band
       transponders over an expected term of approximately 14 years once the
       satellite is placed into commercial operation in its assigned orbital
       location, and the transponders meet specific performance specifications
       and are made available for our use. The present value of the lease
       payments, excluding telemetry, tracking and command services and back-up
       protection, is expected to total $77.0 million to $82.0 million. We will
       record the capital lease obligation and the addition to our Property and

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

       Equipment when the satellite is made available for our use which is
       expected to occur approximately one month after the expected July 2007
       launch.

       A summary of estimated future minimum lease payments for this lease
       follows (amounts in thousands):

           Years ending December 31:
             2006                                    $      ---
             2007                                         4,584
             2008                                         9,168
             2009                                         9,168
             2010                                         9,168
             2011 and thereafter                         96,264
                                                      -----------
               Total minimum lease payments          $  128,352
                                                      ===========

        Upon payment of a monthly fee we have the option to terminate the lease
        of the C-band transponders through June 1, 2007. We may forfeit our
        termination option at which time we would no longer be obligated to
        continue paying the monthly fee. If we elect to terminate our C-band
        transponder lease we must return the transponders and pay a termination
        fee.

        Telecommunication Services Agreement and Capacity Leases
        We leased a portion of our 800-mile fiber optic system capacity that
        extends from Prudhoe Bay to Valdez via Fairbanks, and provided
        management and maintenance services for this capacity to a significant
        customer. The lessee signed a contract with a competitor in March 2005,
        started the transition of its circuits from our fiber optic cable system
        to our competitor's microwave system in June 2006, and plans to have the
        transition complete by November 2006. We expect to sign an agreement
        with our competitor to lease capacity on our fiber optic cable system
        and provide certain other services in association with their contract.
        We expect this transition to result in a $9.5 million annual decrease in
        the data component of Commercial Services segment revenue when it is
        completed with a decrease of approximately one-half the annual decrease
        in the year ended December 31, 2006 depending upon the pace of the
        transition.

        The following summary of minimum future service revenues reflects the
        termination of our contract and includes the expected revenue from the
        new agreement we expect to sign with our competitor in addition to our
        other operating lease agreements included in the summary in note 16
        included in Part II of our December 31, 2005 annual report on Form 10-K
        (amounts in thousands):

              Years ending December 31,
                2006                                        $       19,301
                2007                                                11,694
                2008                                                10,734
                2009                                                 8,154
                2010                                                 5,574
                2011 and thereafter                                 52,700
                                                             ---------------
                  Total minimum future service revenues     $      108,157
                                                             ===============

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

        Anchorage Unbundled Network Elements Arbitration
        On June 25, 2004, the Regulatory Commission of Alaska ("RCA") issued a
        comprehensive decision setting forth new rates for unbundled network
        elements ("UNE"), resale, and terms and conditions for interconnection
        in the Anchorage arbitration. Significantly, the RCA raised the loop
        rate in Anchorage to $19.15 but subsequently reduced the loop rate on
        reconsideration to $18.64. The RCA also issued other various arbitration
        rulings adverse to us, including adopting Alaska Communications Systems
        Group, Inc.'s ("ACS") non-recurring and collocation cost models. On
        December 7, 2004, the Commission issued a final order approving an
        interconnection agreement. We have appealed various Commission
        arbitration rulings.

        On September 30, 2005, the ACS subsidiary serving Anchorage filed a
        petition with the Federal Communications Commission ("FCC"), seeking
        forbearance from the requirement that it provide access to UNEs, and
        that to the extent it voluntarily did so, that the pricing provisions of
        the Act would not apply. We filed our opposition on January 9, 2006 and
        our reply on February 23, 2006. The FCC is required under statute to
        issue a decision by September 30, 2006, or on its own motion, in an
        additional 90 days. If a decision is not issued within the required
        timeframe, the petition is deemed granted. The ability to obtain UNEs is
        an important element of our local exchange and exchange access services
        business, and the outcome of this proceeding could result in a change in
        our ability to access segments of the Anchorage market via the
        facilities of the ILEC and the cost of doing so. We cannot predict at
        this time the outcome of this proceeding or its impact on us; however,
        our net cost of providing local telephone services in Anchorage could be
        materially adversely affected by an adverse decision.

        Alaska DigiTel, LLC ("Alaska DigiTel") Investment
        GCI agreed to invest approximately $29.5 million in exchange for a
        majority equity interest in Alaska DigiTel, a small Alaska Personal
        Communication Services ("PCS") provider. The existing owners will retain
        a minority ownership interest and voting control of Alaska DigiTel. The
        exact percentage and dollar amounts for GCI's interest in Alaska DigiTel
        will vary in proportion to the amount the existing owners elect to
        retain, but GCI expects to own between 75% and 85% after completion of
        the transaction. The transaction is based on a post closing enterprise
        valuation of $37.0 million for Alaska DigiTel. We will fund the
        transaction on GCI's behalf from cash on hand, by drawing down
        additional debt, or a combination of the two. In June 2006, GCI entered
        into a Reorganization Agreement with the members of Alaska DigiTel and
        certain other parties setting forth the formal terms and conditions the
        principal terms of which are the same as those in the superseded
        memorandum of understanding. GCI, Denali PCS, LLC and Alaska DigiTel
        ("Alaska DigiTel Applicants") jointly filed applications with the FCC
        seeking the requisite regulatory consent to the parties' transaction.
        Matanuska Telephone Association filed a Petition to Deny the
        applications with the FCC in February 2006. ACS Wireless, Inc. filed an
        objection to the applications with the FCC in July 2006. The Alaska
        DigiTel Applicants are opposing these adverse filings. It is uncertain
        when the FCC will act upon the contested applications. We are uncertain
        when this transaction will close.

        On GCI's behalf we have provided a $3.0 million bank depository account
        as collateral for an Alaska DigiTel term loan.

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

        Indefeasible Right of Use ("IRU") Commitment
        On July 31, 2006, through our subsidiary GCC we entered into an
        agreement to purchase an IRU in the Kodiak-Kenai Cable Company, LLC's
        marine-based fiber optic cable system linking Anchorage to Kenai, Homer,
        Kodiak and Seward, Alaska. The new system is under construction and we
        anticipate it will be placed into service in the first quarter of 2007.
        We have committed to purchase a minimum of $8.0 million to $8.5 million
        in IRU capacity in three installments through 2011.

                                       26
<PAGE>
PART I.
ITEM 2.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

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

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

GCI, Inc. was incorporated under the laws of the State of Alaska in 1997 to
affect the issuance of senior notes. GCI, Inc., a wholly-owned subsidiary of
GCI, received through its initial capitalization all ownership interests in
subsidiaries previously held by GCI. Shares of GCI's Class A common stock are
traded on the Nasdaq National Market tier of the Nasdaq Stock Market under the
symbol GNCMA. Shares of GCI's Class B common stock are traded on the
Over-the-Counter market. Shares of GCI, Inc.'s common stock are not publicly
traded.

General Overview

Through our focus on long-term results, acquisitions, and strategic capital
investments, we strive to consistently grow our revenues and expand our margins.
We have historically met our cash needs for operations, regular capital
expenditures and maintenance capital expenditures through our cash flows from
operating activities. Historically, cash requirements for significant
acquisitions and major capital expenditures have been provided largely through
our financing activities.

As of January 1, 2006 we were reorganized under Consumer, Network Access,
Commercial and Managed Broadband reportable segments, replacing the
Long-distance, Cable, Local Access and Internet services reportable segments.
The realignment along customer lines rather than product lines allows us to more
efficiently meet the demands of technological and product convergence.

Segment and All Other category data for the six and three months ended June 30,
2005 have been reclassified to reflect the organizational changes for
comparability purposes. A combination of specific identification and general
allocations were employed to reclassify 2005 balances. Allocated amounts were
generally determined using segment revenue or customer counts derived from first
quarter of 2006 segment data. We believe the first quarter of 2006 division of

                                       27
<PAGE>
revenue and customers by segment is representative of the three and six months
ended June 30, 2005 customer composition for purposes of reclassifying 2005
revenue and Cost of Goods Sold balances.

The Network Access segment provides services to other common carrier customers
and the Managed Broadband segment provides services to rural school districts
and rural hospitals and health clinics. Following are our segments and the
services and products each offers to its customers:
<TABLE>
<CAPTION>
                                                            Reportable Segments
                                         ---------------------------------------------------------
                                                                                        Managed
            Services and Products           Consumer   Network Access   Commercial     Broadband
    ------------------------------------ ------------- -------------- -------------- -------------
    <S>                                        <C>            <C>           <C>            <C>
    Voice                                      X              X             X
    ------------------------------------ ------------- -------------- -------------- -------------
    Video                                      X                            X
    ------------------------------------ ------------- -------------- -------------- -------------
    Data                                       X              X             X              X
    ------------------------------------ ------------- -------------- -------------- -------------
    Wireless                                   X                            X
    ------------------------------------ ------------- -------------- -------------- -------------
</TABLE>
An overview of our services and products follows.

Voice Services and Products
Long-distance Services
We generate long-distance services revenues from monthly plan fees and usage
charges.

Factors that have the greatest impact on year-to-year changes in long-distance
services revenues include the rate per minute charged to customers and usage
volumes expressed as minutes of use.

Common carrier traffic routed to us for termination in Alaska is largely
dependent on traffic routed to our common carrier customers by their customers.
Pricing pressures, new program offerings, and market and business consolidations
continue to evolve in the markets served by our other common carrier customers.
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, consistent with federal law. Additionally, disruption in the economy
resulting from terrorist attacks and other attacks or acts of war could affect
our carrier customers. We are unable to predict the effect on us of such
changes. However, given the materiality of other common carrier revenues to us,
a significant reduction in traffic or pricing could have a material adverse
effect on our financial position, results of operations and liquidity.

Due in large part to the favorable synergistic effects of our bundling strategy
focused on consumer and commercial customers, long-distance services continues
to be a significant contributor to our overall performance, although the
migration of traffic from our voice products to our data and wireless products
continues.

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

Local Access Services
We generate local access services revenues from three primary sources: (1) basic
dial tone services; (2) private line and special access services; and (3)
features and other charges, including voice mail, caller ID, distinctive ring,
inside wiring and subscriber line charges.

                                       28
<PAGE>
The primary factors that contribute to year-to-year changes in local access
services revenues include the average number of subscribers to our services
during a given reporting period, the average monthly rates charged for
non-traffic sensitive services, the number and type of additional premium
features selected, the traffic sensitive access rates charged to carriers and
the Universal Service Program.

We estimate that our June 30, 2006 and 2005 total lines in service represent a
statewide market share of approximately 26% and 24%, respectively. At June 30,
2006 and 2005 approximately 86% and 85%, respectively, of our lines are provided
on our own facilities and leased local loops. At June 30, 2006 and 2005
approximately 7% and 6%, respectively, of our lines are provided using the UNE
platform delivery method.

Our local access service faces significant competition in Anchorage, Fairbanks,
and Juneau from ACS, which is the largest incumbent local exchange carrier
("ILEC") in Alaska, and from AT&T Alascom, Inc. ("Alascom") in Anchorage for
Consumer services. Alascom has received certification from the Regulatory
Commission of Alaska to provide local access services in Fairbanks and Juneau.
We believe our approach to developing, pricing, and providing local access
services and bundling different services will allow us to be competitive in
providing those services.

On September 23, 2005, February 2, 2006 and July 18, 2006, the RCA issued orders
granting us certification to serve the service areas of Ketchikan Public
Utilities, Cordova Telephone Cooperative, Copper Valley Telephone Cooperative,
Matanuska Telephone Cooperative, the Glacier State area served by ACS of the
Northland, Alaska Telephone Company, Interior Telephone Company, United-KUC and
Mukluk Telephone Company. The affected rural local exchange carriers have
appealed various aspects of the certification rulings.

We plan to offer service in these new areas using a combination of methods. To a
large extent, we plan to use our existing cable network to deliver local
services. Where we do not have cable plant, we may use wireless technologies and
resale of other carrier's services. We may lease portions of an existing
carrier's network or seek wholesale discounts, but our application is not
dependent upon access to either UNEs of the Incumbent Local Exchange Carrier's
("ILEC") network or wholesale discount rates for resale of ILEC services.

On May 2, 2005 we tendered an interconnection request to the City of Ketchikan
d/b/a Ketchikan Public Utilities ("KPU"), which had been authorized by the RCA
to provide video programming services through its KPU CommVision division on
April 26, 2005. Under the terms of Section 251(f)(1)(C) of the
Telecommunications Act of 1996 KPU's current rural exemption from negotiation
will be forfeited if, and when, KPU commences offering video programming. On
June 3, 2005, we entered into a stipulation with KPU recognizing that KPU will
forfeit its rural exemption and that negotiations for interconnection would
commence when KPU commences offering video programming. Negotiations began in
December 2005 and culminated in a contract in June 2006. The Ketchikan City
Council approved the contract in June 2006 and the contract will be submitted to
the RCA for final approval in August 2006.

We plan to have deployed more than 35,000 additional digital local phone service
("DLPS") lines which utilize our Anchorage coaxial cable facilities by December
31, 2006. This service delivery method allows us to utilize our own cable
facilities to provide local access service to our customers and avoid paying
local loop charges to the ILEC.

                                       29
<PAGE>
Directory Advertising
We sell advertising in our yellow pages directories to commercial customers and
distribute white and yellow pages directories to customers in certain markets we
serve. We also sell on-line directory products.

Video Services and Products
We generate cable services revenues from three primary sources: (1) digital and
analog programming services, including monthly basic and premium subscriptions,
pay-per-view movies and one-time events, such as sporting events; (2) equipment
rentals and installation; and (3) advertising sales.

Our cable systems serve 40 communities and areas in Alaska, including the
state's four largest population centers, Anchorage, Fairbanks, the
Matanuska-Susitna Valley and the Kenai Peninsula.

The primary factors that contribute to period-to-period changes in cable
services revenues include average monthly subscription rates and pay-per-view
buys, the mix among basic, premium and digital tier services, the average number
of cable television subscribers during a given reporting period, set-top box
utilization and related rates, revenues generated from new product offerings,
and sales of cable advertising services.

We increased rates charged for certain cable services in eleven communities,
including three of the state's four largest population centers, Anchorage, the
Matanuska-Susitna Valley, and Fairbanks. The rate increases were primarily
effective in January 2006 and increased approximately 5% for those customers who
experienced an adjustment.

Data Services and Products
Internet Services
We generate Internet services revenues from two primary sources: (1) access
product services, including cable modem and dial-up access; and (2) network
management services.

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

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

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

Private Line and Private Network Services
We generate private line and private network services revenue from two primary
sources: (1) leasing capacity on our facilities that utilize voice and data
transmission circuits, dedicated to particular subscribers, which link a device
in one location to another in a different location and (2) through the sale of
Internet Protocol based data services on a secured shared network to businesses
linking multiple enterprise locations. The factor that has the greatest impact
on year-to-year changes in private line and private network services revenues is

                                       30
<PAGE>
the number of private lines and private networks in use. We compete against
Alascom, ACS and other local telecommunication service providers.

Managed Services
We design, sell, install, service and operate, on behalf of certain customers,
communications and computer networking equipment and provide field/depot, third
party, technical support, communications consulting and outsourcing services. We
also supply integrated voice and data communications systems incorporating
interstate and intrastate digital private lines, point-to-point and multipoint
private network and small earth station services. There are a number of
competing companies in Alaska that actively sell and maintain data and voice
communications systems.

Our ability to integrate communications networks and data communications
equipment has allowed us to maintain our market position based on "value added"
support services rather than price competition. These services are blended with
other transport products into unique customer solutions, including managed
services and outsourcing.

Broadband Services
We generate broadband services revenue through our SchoolAccess(R) and Rural
Health initiatives. Our customers may purchase end-to-end broadband services
solutions blended with other transport and software products such as video
conferencing and unique web content services. There are several competing
companies in Alaska that actively sell broadband services.

Our ability to provide end-to-end broadband services solutions has allowed us to
maintain our market position based on "value added" products and services rather
than solely based on price competition. These services are blended with other
transport and software products into unique customer solutions, including
SchoolAccess(R) and Rural Health applications such as video conferencing and
unique web content services.

Wireless Services and Products
We generate wireless services and equipment revenues from four primary sources:
(1) monthly plan fees; (2) usage and roaming charges; (3) wireless Internet
access; and (4) handset and accessory sales.

We offer wireless services by reselling Dobson Communications Corporation's
("Dobson") services. We provide limited wireless local access and Internet
services using our own facilities. We compete against Dobson, ACS, Alaska
DigiTel, and resellers of those services in Anchorage and other markets.

We have 22,900 and 12,200 combined Consumer and Commercial wireless lines in
service at June 30, 2006 and 2005, respectively. A wireless line in service is
defined as a revenue generating wireless device. Our average wireless revenue
per combined Consumer and Commercial subscriber is $53.90 and $52.62 during the
three and six months ended June 30, 2006, respectively, calculated by dividing
our combined Consumer and Commercial usage revenues by our combined Consumer and
Commercial subscriber count.

GCI has reached a definitive agreement to invest $29.5 million in Alaska
DigiTel. In exchange for the investment, GCI will receive a majority equity
interest in Alaska DigiTel but will not own voting control of the venture. We
view GCI's investment as an incremental way to participate in future growth of
the wireless industry in Alaska. Our existing distribution agreement with Dobson
remains in full effect and our existing wireless products will continue to
compete with Alaska DigiTel in the Alaska market. The transaction is subject to
customary closing conditions, including documentation and regulatory approvals.

                                       31
<PAGE>
The Alaska DigiTel Applicants jointly filed applications with the FCC seeking
the requisite regulatory consent to the parties' transaction. Matanuska
Telephone Association filed a Petition to Deny the applications with the FCC in
February 2006. ACS Wireless, Inc. filed an objection to the applications with
the FCC in July 2006. The Alaska DigiTel Applicants are opposing these adverse
filings. It is uncertain when the FCC will act upon the contested applications.
We are uncertain when this transaction will close.

                                       32
<PAGE>
Results of Operations

The following table sets forth selected Statements of Operations data as a
percentage of total revenues for the periods indicated (underlying data rounded
to the nearest thousands):
<TABLE>
<CAPTION>
                                                                         Percent-                               Percent-
                                                                           age                                    age
                                                                          Change(1)                              Change(1)
                                                Three Months Ended         2006          Six Months Ended         2006
                                                     June 30,               vs.              June 30,              vs.
    (Unaudited)                                 2006          2005         2005         2006         2005         2005
                                                ----          ----         ----         ----         ----         ----
    <S>                                        <C>           <C>          <C>          <C>          <C>        <C>
    Statements of Operations Data:
      Revenues:
        Consumer services segment               37.4%         36.5%         9.6%        37.6%        37.1%         7.9%
        Network Access services segment         35.0%         33.3%        12.1%        34.3%        32.7%        11.5%
        Commercial services segment             22.0%         23.9%        (1.5%)       22.6%        23.8%         0.7%
        Managed broadband services segment       5.6%          6.3%        (5.7%)        5.5%         6.4%        (7.3%)
                                           -------------------------------------------------------------------------------
          Total revenues                       100.0%        100.0%         6.8%       100.0%       100.0%         6.4%
      Selling, general and administrative
        expenses                                34.4%         34.4%         7.0%        34.7%        34.6%         6.8%
      Bad debt expense (recovery)                1.1%          0.2%       589.7%         0.8%        (0.1%)    1,256.6%
      Depreciation and amortization expense     17.1%         16.6%        10.0%        17.5%        16.6%        11.9%
      Operating income                          14.4%         16.3%        (6.1%)       14.4%        16.0%        (4.3%)
      Net income before income taxes and
        cumulative effect of a change in
        accounting principle                     7.4%          8.4%        (5.8%)        7.1%         8.0%        (6.2%)
      Net income before cumulative effect
        of a change in accounting principle      4.4%          4.8%        (2.7%)        3.9%         4.6%        (8.9%)
      Net income                                 4.4%          4.8%        (2.7%)        3.7%         4.6%       (15.0%)
</TABLE>
   --------------------------
   (1)Percentage change in underlying data.
   --------------------------

Three Months Ended June 30, 2006 ("second quarter of 2006") Compared To Three
Months Ended June 30, 2005 ("second quarter of 2005")

Overview of Revenues and Cost of Goods Sold
Total revenues increased 6.8% from $110.7 million in the second quarter of 2005
to $118.2 million in the second quarter of 2006. Revenue increases in our
Consumer and Network Access segments were partially off-set by decreased revenue
in our Commercial and Managed Broadband segments. See the discussion below for
more information by segment.

Total Cost of Goods Sold increased 7.1% from $36.0 million in the second quarter
of 2005 to $38.6 million in the second quarter of 2006. Increases in the

                                       33
<PAGE>
Consumer, Network Access and Commercial segments' Cost of Goods Sold were
partially off-set by decreased Cost of Goods Sold in our Managed Broadband
segment. See the discussion below for more information by segment.

Consumer Services Segment Overview
Consumer services segment revenue in the second quarter of 2006 represented
37.4% of consolidated revenues. The components of Consumer services segment
revenue are as follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                                            Second Quarter               Percentage
                                                                        2006              2005             Change
                                                                   --------------    -------------    ----------------
   <S>                                                            <C>                    <C>               <C>
   Voice                                                          $    11,451            11,593             (1.2%)
   Video                                                               22,329            21,142              5.6%
   Data                                                                 7,258             6,321             14.8%
   Wireless                                                             3,185             1,293            146.3%
                                                                   --------------    -------------    ----------------
     Total Consumer services segment revenue                      $    44,223            40,349              9.6%
                                                                   ==============    =============    ================
</TABLE>
Selected key performance indicators for our Consumer services segment follow:
<TABLE>
<CAPTION>
                                                                               June 30,                 Percentage
                                                                        2006              2005            Change
                                                                   --------------    -------------    ----------------
   <S>                                                                <C>               <C>               <C>
   Voice:
     Total local access lines in service(1)                            67,700            68,200            (0.7%)
     DLPS local access lines in service(1)                             25,300            12,400           104.0%

   Video:
     Basic subscribers(2)                                             121,900           121,200             0.6%
     Digital programming tier subscribers(3)                           55,100            48,700            13.1%
     HD/DVR converter boxes(4)                                         18,800             7,400           154.1%
     Homes passed                                                     217,100           211,000             2.9%

   Data:
     Cable modem subscribers(5)                                        75,000            64,300            16.6%
</TABLE>
   ------------------
   (1) A local access line in service is defined as a revenue generating circuit
       or channel connecting a customer to the public switched telephone
       network.
   (2) A basic cable subscriber is defined as one basic tier of service
       delivered to an address or separate subunits thereof regardless of the
       number of outlets purchased.
   (3) A digital programming tier subscriber is defined as one digital
       programming tier of service delivered to an address or separate subunits
       thereof regardless of the number of outlets or digital programming tiers
       purchased. Digital programming tier subscribers are a sub-set of basic
       subscribers.
   (4) An HD/DVR converter box is defined as one box rented by a digital
       programming or basic tier subscriber. A digital programming or basic tier
       subscriber is not required to rent an HD/DVR converter box to receive
       service.
   (5) A cable modem subscriber is defined by the purchase of cable modem
       service regardless of the level of service purchased. If one entity
       purchases multiple cable modem service access points, each access point
       is counted as a subscriber. Cable modem subscribers may also be basic
       subscribers though basic cable service is not required to receive cable
       modem service.
   ------------------

                                       34
<PAGE>
<TABLE>
<CAPTION>
                                                                            Second Quarter              Percentage
                                                                        2006              2005            Change
                                                                   --------------    -------------    ----------------
   <S>                                                                <C>               <C>               <C>
   Voice:
     Long-distance minutes carried (in millions)                        35.9              40.5            (11.4%)

   Video:
     Average monthly gross revenue per subscriber(1)                  $60.92            $59.22              2.9%
</TABLE>
 -------------------
 (1) Quarter-to-date average monthly consumer video revenues divided by the
     average of consumer video basic subscribers at the beginning and ending of
     the period.
 -------------------

We have 92,800 Consumer long-distance customers at June 30, 2006. A
long-distance customer is defined as a customer account that is invoiced a
monthly long-distance plan fee or has made a long-distance call during the
month. Due to our implementation of a new unified billing system on September 1,
2005 this statistic is not available for June 30, 2005.

Consumer Services Segment Revenues
The 1.2% decrease in voice revenue is primarily due to the decrease in
long-distance minutes carried for these customers. The decrease is partially
off-set by a $157,000 increase in support from the Universal Service Program.

The 5.6% increase in video revenue is primarily due to an increase in digital
programming tier subscribers in the second quarter of 2006, the rate increases
previously described, and a 23.2% increase in equipment rental revenue to $3.2
million in the second quarter of 2006. The increase in equipment rental revenue
is primarily caused by the increased use of digital distribution technology.

The 14.8% increase in data revenue is primarily due to a 16.7% increase in cable
modem revenue to $6.1 million in the second quarter of 2006 as compared to the
second quarter of 2005. The increase in cable modem revenue is primarily due to
the increase in subscribers.

The 146.3% increase in wireless revenue is primarily due to the increase in
wireless subscribers.

Consumer Services Segment Cost of Goods Sold
Consumer services segment Cost of Goods Sold increased 9.0% to $17.1 million
from the second quarter of 2005 to the second quarter of 2006 primarily due to
increased video and wireless Cost of Goods Sold resulting from increased
revenue. The increase in Cost of Goods Sold is partially off-set by decreased
voice Cost of Goods Sold primarily due to cost savings resulting from the
increased deployment of DLPS lines in the last six months of 2005 and the first
six months of 2006.

                                       35
<PAGE>
Network Access Services Segment Overview
Network access services segment revenue in the second quarter of 2006
represented 35.0% of consolidated revenues. The components of Network Access
services segment revenue are as follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                                            Second Quarter               Percentage
                                                                        2006              2005             Change
                                                                   --------------    -------------    ----------------
   <S>                                                            <C>                    <C>                <C>
   Voice                                                          $    27,844            23,940             16.3%
   Data                                                                13,533            12,967              4.4%
                                                                   --------------    -------------    ----------------
     Total Network Access services segment revenue                $    41,377            36,907             12.1%
                                                                   ==============    =============    ================
</TABLE>
Selected key performance indicators for our Network Access services segment
follow:
<TABLE>
<CAPTION>
                                                                               June 30,                  Percentage
                                                                        2006             2005              Change
                                                                   --------------    -------------    ----------------
   <S>                                                                  <C>              <C>                <C>
   Voice:
     Total local access lines in service(1)                             3,300            3,600              (8.3%)
</TABLE>
   ------------------
   (1) A local access line in service is defined as a revenue generating circuit
       or channel connecting a customer to the public switched telephone
       network.
   ------------------
<TABLE>
<CAPTION>
                                                                            Second Quarter               Percentage
                                                                        2006             2005              Change
                                                                   --------------    -------------    ----------------
   <S>                                                                  <C>              <C>                <C>
   Voice:
     Long-distance minutes carried (in millions)                        331.5            271.3              22.2%
</TABLE>
Network Access Services Segment Revenues
The 16.3% increase in voice revenue is primarily due to the increase in minutes
carried for our other common carrier customers partially off-set by a 4.2%
decrease in our rate per minute on minutes carried for other common carriers.
The average rate per minute decrease is primarily due to the annual 3.0% rate
decrease mandated by the Consolidated Appropriations Act for Fiscal Year 2005
effective January 2005 which will result in rate decreases of 3.0% per year
through 2010 and a change in the composition of traffic carried.

Network Access Services Segment Cost of Goods Sold
Network Access services segment Cost of Goods Sold increased 12.9% to $8.8
million from the second quarter of 2005 to the second quarter of 2006 primarily
due to increased voice minutes carried.

                                       36
<PAGE>
Commercial Services Segment Overview
Commercial services segment revenue in the second quarter of 2006 represented
22.0% of consolidated revenues. The components of Commercial services segment
revenue are as follow (amounts in thousands):
<TABLE>
<CAPTION>
                                                                            Second Quarter               Percentage
                                                                        2006              2005             Change
                                                                   --------------    -------------    ----------------
   <S>                                                            <C>                    <C>               <C>
   Voice                                                          $     8,097             8,796             (7.9%)
   Video                                                                1,933             1,889              2.3%
   Data                                                                15,400            15,468             (0.4%)
   Wireless                                                               583               254            129.5%
                                                                   --------------    -------------    ----------------
     Total Commercial services segment revenue                    $    26,013            26,407             (1.5%)
                                                                   ==============    =============    ================
</TABLE>
Selected key performance indicators for our Commercial services segment follow:
<TABLE>
<CAPTION>
                                                                               June 30,                  Percentage
                                                                        2006              2005             Change
                                                                   --------------    -------------    ----------------
   <S>                                                                 <C>               <C>               <C>
   Voice:
     Total local access lines in service(1)                            40,400            40,100              0.7%
     DLPS local access lines in service(1)                              1,100               400            175.0%

   Data:
     Cable modem subscribers(2)                                         7,100             5,900             20.3%
</TABLE>
   ------------------
   (1) A local access line in service is defined as a revenue generating circuit
       or channel connecting a customer to the public switched telephone
       network.
   (2) A cable modem subscriber is defined by the purchase of cable modem
       service regardless of the level of service purchased. If one entity
       purchases multiple cable modem service access points, each access point
       is counted as a subscriber.
   ------------------
<TABLE>
<CAPTION>
                                                                            Second Quarter              Percentage
                                                                        2006              2005            Change
                                                                   --------------    -------------    ----------------
   <S>                                                                  <C>               <C>              <C>
   Voice:
     Long-distance minutes carried (in millions)                        34.4              35.9             (4.2%)
</TABLE>
We have 11,700 Commercial long-distance customers at June 30, 2006. A
long-distance customer is defined as a customer account that is invoiced a
monthly long-distance plan fee or has made a long-distance call during the
month. Due to our implementation of a new unified billing system on September 1,
2005 this statistic is not available for June 30, 2005.

We leased a portion of our 800-mile fiber optic system capacity that extends
from Prudhoe Bay to Valdez via Fairbanks, and provided management and
maintenance services for this capacity to a significant customer. The lessee
signed a contract with a competitor in March 2005, started the transition of
their circuits from our fiber optic cable system to our competitor's microwave
system in June 2006, and plans to have the transition complete by November 2006.
We expect to sign an agreement with our competitor to lease capacity on our
fiber optic cable system in association with their contract. We expect this

                                       37
<PAGE>
transition to result in a $9.5 million annual decrease in the data component of
Commercial Services segment revenue when it is completed with a decrease of
approximately one-half the annual decrease in the year ended December 31, 2006
depending upon the pace of the transition.

Commercial Services Segment Revenues
The 7.9% decrease in voice revenue is primarily due to the decrease in minutes
carried for our Commercial customers.

The 0.4% decrease in data revenue is primarily due to the following:

         o A $475,000 or 84.8% decrease resulting from product sales in second
           quarter 2005 that did not recur in second quarter 2006, and
         o A $65,000 or 0.9% decrease in managed services revenue primarily due
           to a $428,000 or 12.0% decrease in revenue earned from the lease and
           provision of management and maintenance services on a portion of our
           800-mile fiber optic system capacity that extends from Prudhoe Bay to
           Valdez via Fairbanks as described above partially off-set by a
           $363,000 or 10.3% increase in special project revenues.

The decrease is partially off-set by a $494,000 or 15.6% increase in private
line and private network services due to an increase in the number of circuits
sold.

Commercial Services Segment Cost of Goods Sold
Commercial services segment Cost of Goods Sold increased 4.1% to $11.6 million
from the second quarter of 2005 to the second quarter of 2006 primarily due to a
$449,000 or 198.7% increase in wireless Cost of Goods Sold resulting from
increased revenue.

Managed Broadband Services Segment Overview
Managed broadband services segment revenue in the second quarter of 2006
represented 5.6% of consolidated revenues. Managed broadband services segment
revenue, which includes data products only, decreased $397,000 to $6.6 million
in the second quarter of 2006 as compared to the second quarter of 2005.

Selected key performance indicators for our Commercial services segment follow:
<TABLE>
<CAPTION>
                                                                               June 30,                 Percentage
                                                                        2006              2005            Change
                                                                   --------------    -------------    ----------------
   <S>                                                                   <C>               <C>              <C>
   Managed broadband services:
     SchoolAccess(R) customers                                           45                43               4.7%
     Rural health customers                                              21                21               0.0%
</TABLE>
Managed Broadband Services Segment Revenues
The decrease in Managed Broadband services segment revenue is primarily due to a
decrease in our multi-site SchoolAccess(R) customers in the second quarter of
2006 as compared to 2005 and a decrease in the rate charged for certain circuits
purchased by our rural health customers. An increase in single-site
SchoolAccess(R) customers from which we generate less revenue was partially
off-set by the decrease in multi-site SchoolAccess(R) customers.

Managed Broadband Services Segment Cost of Goods Sold
Managed broadband services segment Cost of Goods Sold decreased $316,000 to $1.1
million from the second quarter of 2005 to the second quarter of 2006. The

                                       38
<PAGE>
decrease is primarily due to a second quarter of 2005 analysis of circuit costs
directly contributing to the Managed Broadband services segment revenues. The
analysis resulted in a $535,000 increase in Broadband services Cost of Goods
Sold in the second quarter of 2005 that included first and second quarter 2005
circuit costs.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 7.0% to $40.7 million in
the second quarter of 2006 primarily due to a $1.5 million increase in our
share-based compensation expense mostly resulting from our adoption of SFAS No.
123(R) on January 1, 2006. Following our adoption of SFAS No. 123(R) we
recognized $1.6 million in share-based compensation expense which was allocated
to our reportable segments as follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                                   Reportable Segments
                                            ------------------------------------------------------------------
                                                            Network                       Managed
                                               Consumer      Access       Commercial     Broadband    Total
                                            ------------- ------------ --------------- ------------ ----------
         <S>                               <C>                 <C>           <C>            <C>       <C>
         Share-based compensation expense  $     508           605           348            121       1,582
                                            ============= ============ =============== ============ ==========
</TABLE>
As a percentage of total revenues, selling, general and administrative expenses
were 34.4% in the second quarter of 2006 and 2005.

Bad Debt Expense
Bad debt expense increased $1.1 million to a net expense of $1.3 million in the
second quarter of 2006 as compared to the second quarter of 2005. The increase
is primarily due to the following:

         o A $996,000 decrease in the realization of a recovery from MCI, Inc.
           (merged with Verizon Communications Inc. ("Verizon") in January 2006)
           through a reduction to bad debt expense in the second quarter of 2006
           as compared to the second quarter of 2005, and
         o A $479,000 increase in the allowance for our long-distance, local
           service and Internet invoices generated by the unified order
           management and fulfillment, billing, customer service, cash
           application, and credit and collection system to which we converted
           on September 1, 2005. The allowance increase is due to an increase in
           the age of certain invoices as we resolve billing issues.

Depreciation and Amortization Expense
Depreciation and amortization expense increased 10.0% to $20.2 million in the
second quarter of 2006. The increase is primarily due to our $95.3 million
investment in equipment and facilities placed into service during 2005 for which
a full year of depreciation will be recorded in 2006 and the $21.4 million
investment in equipment and facilities placed into service during the second
quarter of 2006 for which a partial year of depreciation will be recorded in
2006.

Income Tax Expense
GCI, Inc., as a wholly-owned subsidiary and member of the GCI controlled group
of corporations, files its income tax returns as part of the consolidated group
of corporations under GCI. Accordingly, all discussions regarding income taxes
reflect the consolidated group's activity.

Income tax expense totaled $3.9 million in the second quarter of 2006 and $4.0
million in the second quarter of 2005. Our effective income tax rate decreased
from 43.3% in the second quarter of 2005 to 41.6% in the second quarter of 2006.

                                       39
<PAGE>
At June 30, 2006, we have (1) tax net operating loss carryforwards of
approximately $153.8 million that will begin expiring in 2010 if not utilized,
and (2) alternative minimum tax credit carryforwards of approximately $2.2
million available to offset regular income taxes payable in future years. We
estimate that we will utilize net operating loss carryforwards of $22.0 million
to $27.0 million during the year ended December 31, 2006. Our utilization of
certain net operating loss carryforwards is subject to limitations pursuant to
Internal Revenue Code section 382.

Tax benefits associated with recorded deferred tax assets are considered to be
more likely than not realizable through future reversals of existing taxable
temporary differences and future taxable income exclusive of reversing temporary
differences and carryforwards. The amount of deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced which would result in
additional income tax expense. We estimate that our effective annual income tax
rate for financial statement purposes will be 43% to 45% in the year ended
December 31, 2006.

Six Months Ended June 30, 2006 ("2006") Compared To Six Months Ended June 30,
2005 ("2005")

Overview of Revenues and Cost of Goods Sold
Total revenues increased 6.4% from $217.2 million in 2005 to $231.0 million in
2006. Revenue increases in our Consumer, Network Access and Commercial segments
were partially off-set by decreased revenue in our Managed Broadband segment.
See the discussion below for more information by segment.

Total Cost of Goods Sold increased 5.1% from $71.2 million in 2005 to $74.8
million in 2006. Increases in the Consumer and Network Access segments' Cost of
Goods Sold were partially off-set by decreased Cost of Goods Sold in our
Commercial and Managed Broadband segments. See the discussion below for more
information by segment.

Consumer Services Segment Overview
Consumer services segment revenue in 2006 represented 37.6% of consolidated
revenues. The components of Consumer services segment revenue are as follow
(amounts in thousands):
<TABLE>
<CAPTION>
                                                                                                         Percentage
                                                                        2006              2005             Change
                                                                   --------------    -------------    ----------------
   <S>                                                            <C>                    <C>               <C>
   Voice                                                          $    22,763            23,589             (3.5%)
   Video                                                               44,331            42,136              5.2%
   Data                                                                14,219            12,566             13.2%
   Wireless                                                             5,573             2,250            147.7%
                                                                   --------------    -------------    ----------------
     Total Consumer services segment revenue                      $    86,886            80,541              7.9%
                                                                   ==============    =============    ================
</TABLE>
                                       40
<PAGE>
Selected key performance indicators for our Consumer services segment follow:
<TABLE>
<CAPTION>
                                                                                                        Percentage
                                                                        2006              2005            Change
                                                                   --------------    -------------    ----------------
   <S>                                                                <C>               <C>               <C>
   Voice:
     Long-distance minutes carried (in millions)                        72.8              81.3            (10.5%)

   Video:
     Average monthly gross revenue per subscriber(1)                  $60.55            $59.24              2.2%
</TABLE>
 ------------------------
 (1) Year-to-date average monthly consumer video revenues divided by the average
     of consumer video basic subscribers at the beginning and ending of the
     period.
 ------------------------

Please refer to our three-month results of operations discussion for our June
30, 2006 and 2005 selected key performance indicators.

Consumer Services Segment Revenues
The 3.5% decrease in voice revenue is primarily due to the decrease in
long-distance minutes carried for these customers and a $502,000 decrease in
support from the Universal Service Program in 2006 as compared to 2005. The
decrease is partially off-set by an approximately $300,000 increase in local
service revenue in 2006 as compared to 2005 due to the implementation of the
monthly network access fee in April 2005.

The 5.2% increase in video revenue is primarily due to an increase in digital
programming tier subscribers in 2006, the rate increases previously described,
and a 22.1% increase in equipment rental revenue to $6.4 million in 2006. The
increase in equipment rental revenue is primarily caused by the increased use of
digital distribution technology.

The 13.2% increase in data revenue is primarily due to a 13.4% increase in cable
modem revenue to $12.0 million in 2006 as compared to 2005. The increase in
cable modem revenue is primarily due to the increase in subscribers.

The 147.7% increase in wireless revenue is primarily due to the increase in
wireless subscribers.

Consumer Services Segment Cost of Goods Sold
Consumer services segment Cost of Goods Sold increased 7.8% to $33.0 million
from 2005 to 2006 primarily due to increased video and wireless Cost of Goods
Sold resulting from increased revenue. The increase in Cost of Goods Sold is
partially off-set by decreased voice Cost of Goods Sold primarily due to cost
savings resulting from the increased deployment of DLPS lines in the last six
months of 2005 and first six months of 2006.

Network Access Services Segment Overview
Network access services segment revenue in 2006 represented 34.3% of
consolidated revenues. The components of Network Access services segment revenue
are as follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                                                                         Percentage
                                                                        2006              2005             Change
                                                                   --------------    -------------    ----------------
   <S>                                                            <C>                    <C>                <C>
   Voice                                                          $    52,328            44,909             16.5%
   Data                                                                26,872            26,142              2.8%
                                                                   --------------    -------------    ----------------
     Total Network Access services segment revenue                $    79,200            71,051             11.5%
                                                                   ==============    =============    ================
</TABLE>

                                       41
<PAGE>
Selected key performance indicators for our Network Access services segment
follow:
<TABLE>
<CAPTION>
                                                                                                        Percentage
                                                                        2006              2005            Change
                                                                   --------------    -------------    ----------------
   <S>                                                                  <C>               <C>              <C>
   Voice:
     Long-distance minutes carried (in millions)                        619.5             497.9            24.4%
</TABLE>
Please refer to our three-month results of operations discussion for our June
30, 2006 and 2005 selected key performance indicators.

Network Access Services Segment Revenues
The 16.5% increase in voice revenue is primarily due to the increase in minutes
carried for our other common carrier customers partially off-set by a 4.3%
decrease in our rate per minute on minutes carried for other common carriers.
The average rate per minute decrease is primarily due to the annual 3.0% rate
decrease mandated by the Consolidated Appropriations Act for Fiscal Year 2005
effective January 2005 which will result in rate decreases of 3.0% per year
through 2010 and a change in the composition of traffic carried for other common
carriers.

Network Access Services Segment Cost of Goods Sold
Network Access services segment Cost of Goods Sold increased 12.8% to $17.6
million from 2005 to 2006 primarily due to increased voice minutes carried.

Commercial Services Segment Overview
Commercial services segment revenue in 2006 represented 22.6% of consolidated
revenues. The components of Commercial services segment revenue are as follows
(amounts in thousands):
<TABLE>
<CAPTION>
                                                                                                         Percentage
                                                                        2006              2005             Change
                                                                   --------------    -------------    ----------------
   <S>                                                            <C>                    <C>               <C>
   Voice                                                          $    16,120            17,577             (8.3%)
   Video                                                                3,659             3,533              3.6%
   Data                                                                31,310            30,214              3.6%
   Wireless                                                             1,052               442            138.0%
                                                                   --------------    -------------    ----------------
     Total Commercial services segment revenue                    $    52,141            51,766              0.7%
                                                                   ==============    =============    ================
</TABLE>
Selected key performance indicators for our Commercial services segment follow:
<TABLE>
<CAPTION>
                                                                                                        Percentage
                                                                        2006              2005            Change
                                                                   --------------    -------------    ----------------
   <S>                                                                  <C>               <C>              <C>
   Voice:
     Long-distance minutes carried (in millions)                        69.5              71.0             (2.1%)
</TABLE>
Please refer to our three-month results of operations discussion for our June
30, 2006 and 2005 selected key performance indicators.

Commercial Services Segment Revenues
The 8.3% decrease in voice revenue is primarily due to the decrease in minutes
carried for our Commercial customers.

                                       42
<PAGE>
The 3.6% increase in data revenue is primarily due to the following:

         o A $682,000 increase in managed services revenue primarily due to a
           $988,000 or 14.8% increase in special project revenues partially
           off-set by a $306,000 or 4.3% decrease in revenue earned from the
           lease and provision of management and maintenance services on a
           portion of our 800-mile fiber optic system capacity that extends from
           Prudhoe Bay to Valdez via Fairbanks as described above, and
         o A 7.8% increase to $7.1 million in private line and private network
           services due to an increase in the number of circuits sold.

The 138.0% increase in wireless revenue is primarily due to the increase in
wireless subscribers.

Commercial Services Segment Cost of Goods Sold
Commercial services segment Cost of Goods Sold decreased 2.3% to $22.0 million
from 2005 to 2006 primarily due to decreased voice minutes carried and cost
savings resulting from the increased deployment of DLPS lines in the last six
months of 2005 and first six months of 2006. The overall Cost of Goods Sold
decrease is partially off-set by increased managed services Cost of Goods Sold
primarily due to increased managed services revenue in 2006 as compared to 2005.

Managed Broadband Services Segment Overview
Managed broadband services segment revenue in 2006 represented 5.5% of
consolidated revenues. Managed broadband services segment revenue, which
includes data products only, decreased 7.3% to $12.8 million in 2006 as compared
to 2005.

Please refer to our three-month results of operations discussion for our June
30, 2006 and 2005 selected key performance indicators.

Managed Broadband Services Segment Revenues
The decrease in Managed Broadband services segment revenue is primarily due to a
decrease in our multi-site SchoolAccess(R) customers in 2006 as compared to 2005
and a decrease in the rate charged for certain circuits purchased by our rural
health customers. An increase in single-site SchoolAccess(R) customers from
which we generate less revenue was partially off-set by the decrease in
multi-site SchoolAccess(R) customers.

Managed Broadband Services Segment Cost of Goods Sold
Managed broadband services segment Cost of Goods Sold decreased $332,000 to $2.1
million from 2005 to 2006.

                                       43
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 6.8% to $80.3 million in
2006 primarily due to the following:

         o A $2.2 million increase in our share-based compensation expense
           primarily due to our adoption of SFAS No. 123(R) on January 1, 2006.
           Following our adoption of SFAS No. 123(R) we recognized $2.3 million
           in share-based compensation expense which was allocated to our
           reportable segments as follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                                   Reportable Segments
                                            ------------------------------------------------------------------
                                                            Network                       Managed
                                               Consumer      Access       Commercial     Broadband    Total
                                            ------------- ------------ --------------- ------------ ----------
         <S>                               <C>                 <C>            <C>           <C>       <C>
         Share-based compensation expense  $     770           811            509           170       2,260
                                            ============= ============ =============== ============ ==========
</TABLE>
         o A $1.8 million increase in health insurance costs primarily resulting
           from a decrease in our reserve for incurred but not reported health
           insurance claims in 2005 in order to reflect historical experience
           that was not repeated in 2006 and an increase in our medical claims
           in 2006.

The selling, general and administrative expenses increase is partially off-set
by a $677,000 decrease in our company-wide success sharing bonus accrual in
2006.

As a percentage of total revenues, selling, general and administrative expenses
increased to 34.7% in 2006 from 34.6% in 2005, primarily due to an increase in
selling, general and administrative expenses without a proportional increase in
revenues.

Bad Debt Expense (Recovery)
Bad debt expense (recovery) increased $2.0 million to a net expense of $1.8
million in 2006 primarily due to the following:

         o A $1.5 million decrease in the realization of a recovery from Verizon
           through a reduction to bad debt expense in 2006 as compared to 2005,
           and
         o A $859,000 increase in the allowance for our long-distance, local
           service and Internet invoices generated by the unified order
           management and fulfillment, billing, customer service, cash
           application, and credit and collection system to which we converted
           on September 1, 2005. The allowance increase is due to an increase in
           the age of certain invoices as we resolve billing issues.

Depreciation and Amortization Expense
Depreciation and amortization expense increased 11.9% to $40.3 million in 2006.
The increase is primarily due to our $95.3 million investment in equipment and
facilities placed into service during 2005 for which a full year of depreciation
will be recorded in 2006 and the $21.4 million investment in equipment and
facilities placed into service during 2006 for which a partial year of
depreciation will be recorded in 2006.

Income Tax Expense
Income tax expense totaled $7.5 million in 2006 and $7.5 million in 2005. Our
effective income tax rate increased from 43.0% in 2005 to 44.7% in 2006 due
primarily to adjustments to deferred tax assets and liabilities balances in
2006.

                                       44
<PAGE>
Cumulative Effect of a Change in Accounting Principle
On January 1, 2006 we adopted SFAS No. 123(R), "Share-Based Payment." SFAS
123(R) requires us to measure share-based compensation liability instruments at
fair value as of January 1, 2006. Previously, we measured those liability
instruments at their intrinsic value determined as of their grant date. The
transition impact (expense) of adopting SFAS No. 123(R) attributed to measuring
such liability instruments at fair value totaled approximately $1.1 million, net
of income tax benefit of $469,000 and is reported as a component of the
cumulative effect of change in accounting principle in the accompanying June 30,
2006 Consolidated Statement of Operations.

Additionally, SFAS 123(R) requires us to estimate pre-vesting option forfeitures
at the time of grant and periodically revise those estimates in subsequent
periods if actual forfeitures differ from those estimates. We record share-based
compensation expense only for those awards expected to vest using an estimated
forfeiture rate based on our historical pre-vesting forfeiture data. Previously,
we accounted for forfeitures as they occurred under the pro forma disclosure
provisions of SFAS 123 for periods prior to 2006. The transition impact
(benefit) of adopting SFAS No. 123(R) attributed to accruing for expected
forfeitures on outstanding share-based awards totaled $108,000, net of income
tax expense of $44,000 and is reported as a component of the cumulative effect
of change in accounting principle in the accompanying June 30, 2006 Consolidated
Statement of Operations.

Multiple System Operator ("MSO") Operating Statistics
Our operating statistics include capital expenditures and customer information
from our Consumer and Commercial services segments which offer services
utilizing our cable services' facilities.

Our capital expenditures by standard reporting category for the six months ended
June 30, 2006 and 2005 follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                             2006             2005
                                                        --------------    -------------
    <S>                                                <C>                   <C>
    Customer premise equipment                         $     7,799            7,138
    Line extensions                                          4,677            1,363
    Upgrade/rebuild                                          2,561            7,441
    Support capital                                            610              508
    Scalable infrastructure                                    386            1,818
    Commercial                                                  17              169
                                                        --------------    -------------
    Sub-total                                               16,050           18,437
    Remaining reportable segments capital
      expenditures                                          19,169           29,253
                                                        --------------    -------------
                                                       $    35,219           47,690
                                                        ==============    =============
</TABLE>
The standardized definition of a customer relationship is the number of
customers that receive at least one level of service utilizing our cable
services segment's facilities, encompassing voice, video, and data services,
without regard to which services customers purchase. At June 30, 2006 and 2005
we had 123,800 and 125,400 customer relationships, respectively.

The standardized definition of a revenue generating unit is the sum of all
primary analog video, digital video, high-speed data, and telephony customers,
not counting additional outlets. At June 30, 2006 and 2005 we had 247,800 and
220,500 revenue generating units, respectively.

                                       45
<PAGE>
Liquidity and Capital Resources

Cash flows from operating activities totaled $53.7 million for the six months
ended June 30, 2006 as compared to $53.4 million for the six months ended June
30, 2005.

Other sources of cash during the six months ended June 30, 2006 included $7.7
million from GCI's issuance of its Class A common stock. Other uses of cash
during the six months ended June 30, 2006 included expenditures of $35.2 million
for property and equipment, including construction in progress, the purchase on
GCI's behalf of $21.9 million of common stock to be retired, and the
establishment of a $3.0 million bank depository account on behalf of GCI as
collateral for an Alaska DigiTel term loan.

Working capital totaled $86.0 million at June 30, 2006, a $9.5 million increase
as compared to $76.5 million at December 31, 2005. The change is primarily due
to a $2.6 million reclassification of a long-term deposit to current assets and
a $2.5 million reclassification of the current portion of Notes Receivable from
Related Parties from non-current assets at June 30, 2006 as compared to December
31, 2005.

Net receivables increased $2.2 million from December 31, 2005 to June 30, 2006
primarily due to the timing of payments on trade receivables from several large
customers.

Senior Notes
We were in compliance with all Senior Notes loan covenants at June 30, 2006.

Senior Credit Facility
We were in compliance with all Senior Credit Facility loan covenants at June 30,
2006.

Capital Lease Obligation
On March 31, 2006, through our subsidiary GCC we entered into an agreement to
lease transponder capacity on Intelsat's Galaxy 18 spacecraft that is expected
to be launched during 2007. We will also lease capacity on the Horizons 1
satellite, which is owned jointly by Intelsat and JSAT International, Inc. The
leased capacity is expected to replace our existing transponder capacity on
Intelsat's Galaxy 10R satellite when it reaches its end of life.

We will lease, subject to a termination option, C-band and Ku-Band transponders
over an expected term of approximately 14 years once the satellite is placed
into commercial operation in its assigned orbital location, and the transponders
meet specific performance specifications and are made available for our use. The
present value of the lease payments, excluding telemetry, tracking and command
services and back-up protection, is expected to total $77.0 million to $82.0
million. We will record the capital lease obligation and the addition to our
Property and Equipment when the satellite is made available for our use which is
expected to occur approximately one month after the expected July 2007 launch.

                                       46
<PAGE>
A summary of estimated future minimum lease payments for this lease follows
(amounts in thousands):

           Years ending December 31:
             2006                                            $      ---
             2007                                                 4,584
             2008                                                 9,168
             2009                                                 9,168
             2010                                                 9,168
             2011 and thereafter                                 96,264
                                                              -----------
               Total minimum lease payments                  $  128,352
                                                              ===========

Upon payment of a monthly fee, we have the option to terminate the lease of the
C-band transponders through June 1, 2007. We may forfeit our termination option
at which time we would no longer be obligated to continue paying the monthly
fee. If we elect to terminate our C-band transponder lease we must return the
transponders and pay a termination fee.

Capital Expenditures
Our expenditures for property and equipment, including construction in progress,
totaled $35.2 million and $47.7 million during the six months ended June 30,
2006 and 2005, respectively. Our capital expenditures requirements in excess of
approximately $25.0 million per year are largely success driven and are a result
of the progress we are making in the marketplace. We expect our 2006
expenditures for property and equipment for our core operations, including
construction in progress, to total $80.0 million to $90.0 million, depending on
available opportunities and the amount of cash flow we generate during 2006.

Share Repurchases
GCI's Board of Directors has authorized a common stock buyback program for the
repurchase of GCI's Class A and Class B common stock in order to reduce their
outstanding shares of Class A and Class B common stock. We pay for the stock
repurchases on GCI's behalf. GCI's Board of Directors authorized us and we
obtained permission from our lenders for up to $50.0 million of repurchases
through June 30, 2006. We are authorized to continue the stock repurchases of up
to $5.0 million per quarter indefinitely and to use stock option exercise
proceeds to repurchase additional shares. If stock repurchases are less than the
total approved quarterly amount the difference may be carried forward and
applied against future stock repurchases. During the six months ended June 30,
2006 we repurchased 1,857,442 shares of GCI's common stock at a cost of
approximately $21.9 million. We expect to continue the repurchases for an
indefinite period subject to the availability of free cash flow, availability
under our credit facilities, and the price of GCI's Class A and Class B common
stock. The repurchases have and will continue to comply with the restrictions of
SEC Rule 10b-18.

Other Expenditures
GCI agreed to invest approximately $29.5 million in exchange for a majority
equity interest in Alaska DigiTel, a small Alaska PCS provider. The existing
owners will retain a minority ownership interest and voting control of Alaska
DigiTel. The exact percentage and dollar amounts for GCI's interest in Alaska
DigiTel will vary in proportion to the amount the existing owners elect to
retain, but GCI expects to own between 75% and 85% after completion of the
transaction. The transaction is based on a post closing enterprise valuation of
$37.0 million for Alaska DigiTel. We will fund the transaction on GCI's behalf
from cash on hand, by drawing down additional debt, or a combination of the two.
In June 2006 GCI entered into a Reorganization Agreement with the members of
Alaska DigiTel and certain other parties setting forth the formal terms and
conditions the principal terms of which are the same as those in the superseded
memorandum of understanding. The Alaska DigiTel Applicants jointly filed
applications with the FCC seeking the requisite regulatory consent to the
parties' transaction. Matanuska Telephone Association filed a Petition to Deny
the applications with the FCC in February 2006. ACS Wireless, Inc. filed an

                                       47
<PAGE>
objection to the applications with the FCC in July 2006. The Alaska DigiTel
Applicants are opposing these adverse filings. It is uncertain when the FCC will
act upon the contested applications. We are uncertain when this transaction will
close.

We have provided on GCI's behalf a $3.0 million bank depository account as
collateral for an Alaska DigiTel term loan.

On July 31, 2006, through our subsidiary GCC we entered into an agreement to
purchase an IRU in the Kodiak-Kenai Cable Company, LLC's marine-based fiber
optic cable system linking Anchorage to Kenai, Homer, Kodiak and Seward, Alaska.
The new system is under construction and we anticipate it will be placed into
service in the first quarter of 2007. We have committed to purchase a minimum of
$8.0 million to $8.5 million in IRU capacity in three installments through 2011.

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

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

                                       48
<PAGE>
Schedule of Certain Known Contractual Obligations

The following table details future projected payments associated with certain
known contractual obligations as of December 31, 2005, the date of our most
recent fiscal year-end balance sheet. Our schedule of certain known contractual
obligations has been updated to reflect our transponder capacity capital lease
obligation discussed above.
<TABLE>
<CAPTION>
                                                                    Payments Due by Period
                                               ----------------------------------------------------------------
                                                             Less than 1    1 to 3       4 to 5    More than 5
                                                   Total         Year        Years        Years       Years
                                               ----------------------------------------------------------------
                                                                    (Amounts in thousands)
   <S>                                        <C>               <C>         <C>          <C>         <C>
   Long-term debt                             $   479,550        1,725       3,425        3,200      471,200
   Interest on long-term debt                     197,200       23,200      46,400       46,400       81,200
   Capital lease obligations, including
     interest                                     130,594          252      14,268       18,852       97,222
   Operating lease commitments                     79,532       19,359      24,254       15,875       20,044
   Purchase obligations                            26,322       15,753      10,569          ---          ---
    Other                                          29,500       29,500         ---          ---          ---
                                               ------------- ----------- ------------ ------------ ------------
     Total contractual obligations            $   942,698       89,789      98,916       84,327      669,666
                                               ============= =========== ============ ============ ============
</TABLE>
For long-term debt included in the above table, we have included principal
payments on our Senior Credit Facility and on our Senior Notes. Interest on
amounts outstanding under our Senior Credit Facility is based on variable rates
and therefore the amount is not determinable. Our Senior Notes require
semi-annual interest payments of $11.6 million through February 2014. For a
discussion of our Senior Notes and Senior Credit Facility see note 7 in the
"Notes to Consolidated Financial Statements" included in Part II of our December
31, 2005 annual report on Form 10-K.

For a discussion of our capital and operating leases, see note 16 in the "Notes
to Consolidated Financial Statements" included in Part II of our December 31,
2005 annual report on Form 10-K and note 6 in the accompanying "Notes to Interim
Condensed Consolidated Financial Statements."

Purchase obligations include a remaining commitment to purchase a certain number
of outdoor, network powered multi-media adapters, indoor multi-media adapters,
cable modems, and cable modem termination systems of $6.9 million and a
remaining $10.8 million commitment for our Alaska Airlines agreement as further
described in note 16 in the "Notes to Consolidated Financial Statements"
included in Part II of our December 31, 2005 annual report on Form 10-K. The
contracts associated with these commitments are non-cancelable. Purchase
obligations also include open purchase orders for goods and services for capital
projects and normal operations totaling $8.6 million which are not included in
our Consolidated Balance Sheets at December 31, 2005, because the goods had not
been received or the services had not been performed at December 31, 2005. The
open purchase orders are cancelable.

Other consists of GCI's commitment to acquire a substantial equity interest in
Alaska DigiTel for approximately $29.5 million as further described above.

                                       49
<PAGE>
New Accounting Standards

For a discussion of our new accounting standards see note 1(j) in the
accompanying "Notes to Interim Condensed Consolidated Financial Statements"
included in Part I, Item 1 of this Report.

Critical Accounting Policies

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

Those policies considered to be critical accounting policies for the six months
ended June 30, 2006 are described below.

        o  We maintain allowances for doubtful accounts for estimated losses
           resulting from the inability of our customers to make required
           payments. We also maintain an allowance for doubtful accounts based
           on our assessment of the likelihood that our customers will
           satisfactorily comply with rules necessary to obtain supplemental
           funding from the Universal Service Administrative Company ("USAC")
           for services provided by us under our packaged communications
           offerings to rural hospitals, health clinics and school districts. We
           base our estimates on the aging of our accounts receivable balances,
           financial health of specific customers, regional economic data,
           changes in our collections process, regulatory requirements, and our
           customers' compliance with USAC rules. If the financial condition of
           our customers were to deteriorate or if they are unable to emerge
           from reorganization proceedings, resulting in an impairment of their
           ability to make payments, additional allowances may be required. If
           their financial condition improves or they emerge successfully from
           reorganization proceedings, allowances may be reduced. Such allowance
           changes could have a material effect on our consolidated financial
           condition and results of operations.

        o  We record all assets and liabilities acquired in purchase
           acquisitions, including goodwill and other intangibles, at fair value
           as required by SFAS No. 141, "Business Combinations." Goodwill and
           indefinite-lived assets such as our cable certificates are not
           amortized but are subject, at a minimum, to annual tests for
           impairment and quarterly evaluations of whether events and
           circumstances continue to support an indefinite useful life as
           required by SFAS No. 142, "Goodwill and Other Intangible Assets."
           Other intangible assets are amortized over their estimated useful
           lives using the straight-line method, and are subject to impairment

                                       50
<PAGE>
           if events or circumstances indicate a possible inability to realize
           the carrying amount as required by SFAS No. 142. The initial goodwill
           and other intangibles recorded and subsequent impairment analysis
           requires management to make subjective judgments concerning estimates
           of the applicability of quoted market prices in active markets and,
           if quoted market prices are not available and/or are not applicable,
           how the acquired asset will perform in the future using a discounted
           cash flow analysis. Estimated cash flows may extend beyond ten years
           and, by their nature, are difficult to determine over an extended
           timeframe. Events and factors that may significantly affect the
           estimates include, among others, competitive forces, customer
           behaviors and attrition, changes in revenue growth trends, cost
           structures and technology, and changes in discount rates, performance
           compared to peers, material and ongoing negative economic trends, and
           specific industry or market sector conditions. In determining the
           reasonableness of cash flow estimates, we review historical
           performance of the underlying asset or similar assets in an effort to
           improve assumptions utilized in our estimates. In assessing the fair
           value of goodwill and other intangibles, we may consider other
           information to validate the reasonableness of our valuations
           including third-party assessments. These evaluations could result in
           a change in useful lives in future periods and could result in
           write-down of the value of intangible assets. Our cable certificate
           and goodwill assets are our only indefinite-lived intangible assets
           and because of the significance of our cable certificate and goodwill
           assets to our consolidated balance sheet, our annual and quarterly
           impairment analyses and quarterly evaluations of remaining useful
           lives are critical. Any changes in key assumptions about the business
           and its prospects, changes in market conditions or other
           externalities, or recognition of previously unrecognized intangible
           assets for impairment testing purposes could result in an impairment
           charge and such a charge could have a material adverse effect on our
           consolidated results of operations.

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

        o  Our income tax policy provides for deferred income taxes to show the
           effect of temporary differences between the recognition of revenue
           and expenses for financial and income tax reporting purposes and
           between the tax basis of assets and liabilities and their reported
           amounts in the financial statements in accordance with SFAS No. 109,
           "Accounting for Income Taxes." We have recorded deferred tax assets
           of approximately $62.9 million associated with income tax net
           operating losses that were generated from 1992 to 2003, and that
           expire from 2010 to 2025. Pre-acquisition income tax net operating
           losses associated with acquired companies are subject to additional
           deductibility limits. We have recorded deferred tax assets of
           approximately $2.2 million associated with alternative minimum tax
           credits that do not expire. Significant management judgment is
           required in developing our provision for income taxes, including the
           determination of deferred tax assets and liabilities and any
           valuation allowances that may be required against the deferred tax
           assets. In conjunction with certain 1996 acquisitions, we determined
           that approximately $20.0 million of the acquired net operating losses
           would not be utilized for income tax purposes, and elected with our
           December 31, 1996 income tax returns to forego utilization of such

                                       51
<PAGE>
           acquired losses. Deferred tax assets were not recorded associated
           with the foregone losses and, accordingly, no valuation allowance was
           provided. We have not recorded a valuation allowance on the deferred
           tax assets as of June 30, 2006 based on management's belief that
           future reversals of existing taxable temporary differences and
           estimated future taxable income exclusive of reversing temporary
           differences and carryforwards, will, more likely than not, be
           sufficient to realize the benefit of these assets over time. In the
           event that actual results differ from these estimates or if our
           historical trends change, we may be required to record a valuation
           allowance on deferred tax assets, which could have a material adverse
           effect on our consolidated financial position or results of
           operations.

Other significant accounting policies, not involving the same level of
measurement uncertainties as those discussed above, are nevertheless important
to an understanding of the financial statements. Policies related to revenue
recognition, share-based payments, and financial instruments require difficult
judgments on complex matters that are often subject to multiple sources of
authoritative guidance. Certain of these matters are among topics currently
under reexamination by accounting standards setters and regulators. No specific
conclusions reached by these standard setters appear likely to cause a material
change in our accounting policies, although outcomes cannot be predicted with
confidence. A complete discussion of our significant accounting policies can be
found in note 1 in "Notes to Consolidated Financial Statements" included in Part
II of our December 31, 2005 annual report on Form 10-K.

Geographic Concentration and the Alaska Economy

We have one major customer, Verizon. Our remaining customers are located
primarily throughout Alaska. Because of this geographic concentration, our
growth and operations depend upon economic conditions in Alaska. The economy of
Alaska is dependent upon the natural resources industries, and in particular oil
production, as well as tourism, government, and United States military spending.
Any deterioration in these markets could have an adverse impact on us. All of
the federal funding and the majority of investment revenues are dedicated for
specific purposes, leaving oil revenues as the primary source of general
operating revenues. 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.

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

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

                                       52
<PAGE>
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 Credit Facility carries interest rate risk. Amounts borrowed under
this Agreement bear interest at LIBOR plus 1.50% or less depending upon our
Total Leverage Ratio (as defined). Should the LIBOR rate change, our interest
expense will increase or decrease accordingly. As of June 30, 2006, we have
borrowed $158.4 million subject to interest rate risk. On this amount, each 1%
increase in the LIBOR interest rate would result in $1,584,000 of additional
gross interest cost on an annualized basis.


PART I.
ITEM 4.
                             Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we
carried out an evaluation of the effectiveness of the design and operation of
our "disclosure controls and procedures" (as defined in the Securities Exchange
Act of 1934 ("Exchange Act") Rules 13a - 15(e)) under the supervision and with
the participation of our management, including our Chief Executive Officer and
our Chief Financial Officer. Based upon that evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures are effective.

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


(b) Changes in Internal Controls

During the first quarter of 2006 we corrected certain configuration settings in
our new customer billing system so that credits and other adjustments are
properly recorded. We will continue to vigorously monitor the effectiveness of
these processes, procedures and controls, and will make any further changes as
management determines appropriate.

There were no changes in our internal control over financial reporting
identified in connection with the evaluation of our controls performed during
the quarter ended June 30, 2006 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

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

                                       53
<PAGE>
Internal controls are a system designed to provide reasonable assurance to the
Company's management and board of directors regarding the preparation and fair
presentation of its financial statements. All internal control systems, no
matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.


PART II.
ITEM 1.

                                LEGAL PROCEEDINGS

Information regarding material pending legal proceedings to which we are a party
is included in note 6 to the accompanying "Notes to Interim Condensed
Consolidated Financial Statements" and is incorporated herein by reference.

                                       54
<PAGE>
PART II.
ITEM 6.
                                                               EXHIBITS
<TABLE>
<CAPTION>
          Exhibit No.                                        Description
        --------------------------------------------------------------------------------------------------------
            <S>          <C>
            10.135       Tenth Amendment to Contract for Alaska Access Services between General
                           Communication, Inc. and its wholly owned subsidiary GCI Communication Corp., and
                           MCI Communications Services, Inc. d/b/a Verizon Business Services
                           (successor-in-interest to MCI Network Services, Inc., which was formerly known as
                           MCI WorldCom Network Services)*
            10.136       Reorganization Agreement among General Communication, Inc., Alaska DigiTel, LLC, The
                           Members of Alaska DigiTel, LLC, AKD Holdings, LLC and The Members of Denali PCS,
                           LLC dated as of June 16, 2006 (Nonmaterial schedules and exhibits to the
                           Reorganization Agreement have been omitted pursuant to Item 601b.2 of Regulation S-K.
                           We agree to furnish supplementally to the Commission upon request a copy of any
                           omitted schedule or exhibit.)*
            31.1         Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302
                           of the Sarbanes-Oxley Act of 2002 by our President and Director
            31.2         Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302
                           of the Sarbanes-Oxley Act of 2002 by our Senior Vice President, Chief Financial
                           Officer, Secretary and Treasurer
            32.1         Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
                           of the Sarbanes-Oxley Act of 2002 by our President and Director
            32.2         Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
                           of the Sarbanes-Oxley Act of 2002 by our Senior Vice President, Chief Financial
                           Officer, Secretary and Treasurer
</TABLE>
         -------------------------
         *  CONFIDENTIAL PORTION has been omitted pursuant to a
            request for confidential treatment by us to, and the
            material has been separately filed with, the
            Securities and Exchange Commission. Each omitted
            Confidential Portion is marked by four asterisks.
          -------------------------

                                       55
<PAGE>
                                   SIGNATURES


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



                                    GCI, INC.
<TABLE>
<CAPTION>
              Signature                                        Title                                 Date
-------------------------------------       ------------------------------------------       -------------------
<S>                                         <C>                                                 <C>
/s/ Ronald A. Duncan                        President and Director                              August 8, 2006
-------------------------------------       (Principal Executive Officer)                    -------------------
Ronald A. Duncan

/s/ G. Wilson Hughes                        Vice President and Director                         August 8, 2006
-------------------------------------                                                        -------------------
G. Wilson Hughes

/s/ John M. Lowber                          Secretary, Treasurer and Director                   August 8, 2006
-------------------------------------       (Principal Financial and Accounting              -------------------
John M. Lowber                              Officer)
</TABLE>
                                       56