GCI INC, S-1, 1997-06-11

GCI INC
S-1, 1997-06-11

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<PAGE>
AS FILED WITH SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1997.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

GCI, INC.

(Exact name of registrant as specified in its charter)

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<S> <C> <C>
ALASKA 4899 (APPLIED FOR)
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>

2550 DENALI ST., SUITE 1000, ANCHORAGE, ALASKA 99503
(907) 265-5600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

JOHN M. LOWBER
GCI, INC.
2550 DENALI STREET, SUITE 1000
ANCHORAGE, ALASKA 99503-2781
(907) 265-5600

(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------

COPIES TO:

CHARLES Y. TANABE, ESQ. JOEL M. SIMON, ESQ.
SHERMAN & HOWARD L.L.C. PAUL, HASTINGS, JANOFSKY & WALKER LLP
FIRST INTERSTATE TOWER NORTH 399 PARK AVENUE
633 SEVENTEENTH STREET, SUITE 3000 31ST FLOOR
DENVER, COLORADO 80202 NEW YORK, NEW YORK 10022
(303) 299-8108 (212) 318-6200

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
% Senior Notes Due 2007 $150,000,000 100% $150,000,000 $45,454.55
</TABLE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE>
SUBJECT TO COMPLETION

MAY 29, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS

$150,000,000

[LOGO]
GCI, INC.
(A WHOLLY OWNED SUBSIDIARY OF GENERAL COMMUNICATION, INC.)

% SENIOR NOTES DUE 2007

The % Senior Notes Due 2007 (the "Notes") are being offered by GCI, Inc. (the
"Issuer") and will mature on , 2007. The Issuer is a wholly owned
subsidiary of General Communication, Inc. (the "Parent"). Interest on the Notes
will be payable semiannually on and of each year,
commencing , 1997. The Notes will be redeemable at the option of the
Issuer, in whole or in part, at any time on or after , 2002 at the
redemption prices set forth herein, plus accrued and unpaid interest, if any, to
the date of redemption. In addition, prior to , 2000, the Issuer
may use the net cash proceeds of one or more Public Equity Offerings (as
defined) to redeem up to 33 1/3% of the initially issued aggregate principal
amount of the Notes at a redemption price of % of the aggregate principal
amount thereof, together with accrued and unpaid interest thereon to the date of
redemption; provided that not less than $100 million aggregate principal amount
of the Notes remains outstanding following any such redemption. See "Description
of Notes--Optional Redemption." Upon a Change of Control (as defined), the
Issuer will be required to make an offer to purchase all of the Notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase. See "Description of
Notes--Mandatory Offer to Purchase Upon a Change of Control."

Concurrently with the offering of the Notes (the "Debt Offering"), 13.8 million
shares of Parent's Class A common stock (assuming no exercise of the
Underwriters' over-allotment option) will be offered to the public, of which
approximately 7.0 million shares will be for the account of Parent and
approximately 6.8 million shares will be for the account of certain selling
shareholders of Parent (the "Stock Offering" and, together with the Debt
Offering, the "Offerings"). Consummation of the Debt Offering is not contingent
upon consummation of the Stock Offering, and there can be no assurance that the
Stock Offering will be consummated. The Debt Offering is contingent upon the
refinancing of the existing credit facilities of the Issuer's subsidiaries. See
"Description of Credit Facility."

The Notes will be senior unsecured obligations of the Issuer and will rank PARI
PASSU with all unsubordinated, unsecured indebtedness of the Issuer. The Notes
will be structurally subordinated to the indebtedness and all other liabilities
of the subsidiaries of the Issuer. As of March 31, 1997, after giving effect to
the Offerings and the application of the net proceeds therefrom, the total
consolidated indebtedness of the Issuer would have been $173.5 million, and the
total liabilities of the Issuer's subsidiaries (including trade payables and
accrued liabilities), would have been approximately $93.8 million, of which
$23.5 million would have been indebtedness. The Issuer's subsidiaries expect to
incur significant additional indebtedness and other liabilities in the future.
Although the Notes are entitled "senior," the Issuer had no indebtedness as of
the date of this Prospectus that would have been subordinated to the Notes and
has no current plans to incur such indebtedness.

SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT ISSUER (2)
Per Note...................................... % % %
Total......................................... $ $ $
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</TABLE>

(1) Plus accrued interest, if any, from , 1997, to the date of delivery.

(2) Before deduction of expenses payable by the Issuer, estimated to be
$ .

The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made through the facilities of The Depository
Trust Company on or about , 1997.

SALOMON BROTHERS INC

SCHRODER WERTHEIM & CO.

NATIONSBANC CAPITAL MARKETS, INC.

TD SECURITIES

The date of this Prospectus is , 1997.
<PAGE>
[LOGO]

------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
PURCHASES OF THE NOTES TO COVER SOME OR ALL OF A SHORT POSITION IN THE NOTES
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in "Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," including statements regarding the anticipated development and
expansion of the Company's business, the markets in which the Company's services
are offered, anticipated capital expenditures and regulatory reform, the intent,
belief or current expectations of the Company, its directors or its officers,
primarily with respect to the future operating performance of the Company, and
other statements contained in this Prospectus regarding matters that are not
historical facts, are "forward-looking" statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995). Because such statements
include risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. Factors that could
cause actual results to differ materially from those expressed or implied by
such forward-looking statements include, but are not limited to, the factors set
forth in "Risk Factors" and "Business."

2
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MAP OF ALASKA SHOWING (1) THE CITIES AND AREAS SERVICED BY THE COMPANY AND
NATURE OF SERVICE, E.G., LONG DISTANCE, CABLE, PROPOSED LOCAL EXCHANGE AND PCS,
(2) A STYLIZED LINK TO AND OUTLINE OF THE LOWER 48 STATES, (3) FIBER OPTIC OCEAN
CABLE ROUTE, AND (4) USE OF SATELLITES FOR COMMUNICATIONS.

3
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE
"COMPANY" REFERS TO GENERAL COMMUNICATION, INC. AND, WHERE APPLICABLE, ITS
DIRECT AND INDIRECT SUBSIDIARIES, INCLUDING THE ISSUER. SEE "GLOSSARY" FOR
DEFINITIONS OF CERTAIN OTHER TERMS USED IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE
OVER-ALLOTMENT OPTION OFFERED TO THE UNDERWRITERS IN THE STOCK OFFERING.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER THE
CAPTION "RISK FACTORS."

THE COMPANY

The Company is a diversified telecommunications provider with a leading
position in facilities-based long distance service in the State of Alaska and,
as a result of recent acquisitions, has become Alaska's leading cable television
service provider. The Company seeks to become the first significant provider in
Alaska of an integrated package of telecommunications and cable television
services. Complementing its long distance, cable and cellular resale operations,
the Company has announced plans to provide facilities-based competitive local
exchange and wireless communications services in Alaska's major population
centers. The Company expects to launch local exchange services in the second
half of 1997 initially in Anchorage where it has received a local exchange
certificate of authority and entered into an interconnection agreement with the
incumbent local exchange carrier ("LEC") which has been approved by the Alaska
Public Utilities Commission (the "APUC"). The Company also acquired a state-wide
30 MHz B-block personal communication service ("PCS") license in June 1995 for
approximately $1.65 million (or about $3.00 per population equivalent or "pop")
and is currently evaluating various technologies for a proposed wireless PCS
network.

The Company believes that historical distinctions between telephony,
wireless communications and cable television services are disappearing as a
result of regulatory and technological changes. Upon becoming the first
significant integrated provider of such services in Alaska, the Company believes
that it will benefit from a number of advantages that would be difficult and
costly for a competitor to replicate. By providing multiple telecommunications
and cable services, the Company will be able to (i) expand the Company's
addressable market in Alaska and increase the Company's share of its customers'
voice, video and data expenditures, (ii) leverage the Company's existing
customer base by cross-selling its services, (iii) attract new customers and
improve customer retention rates by offering its customers a package of
services, a single bill and a single point-of-contact for customer service, (iv)
reduce capital spending requirements by sharing facilities, equipment and
rights-of-way, (v) contain administrative and personnel costs by combining
functional areas and (vi) reduce local access costs by bypassing some or all of
the incumbent LECs' facilities.

The Company began providing interstate long distance service in 1982 and
began providing intrastate long distance service in 1991. The Company provides a
full range of long distance services,

4
<PAGE>
including direct dial, 800, message toll, private line, private network,
operator and calling and debit card services, to residential, commercial and
governmental customers and to other common carriers. In addition, the Company
sells data communication equipment and offers technical services.

The Company operates a state-of-the-art, competitive telecommunications
network employing the latest digital transmission technology based upon fiber
optic and digital microwave facilities within and between Anchorage, Fairbanks
and Juneau, a digital fiber optic cable linking Alaska to the contiguous 48
states and providing access to other carriers' networks for communication around
the world, and the use of satellite transmission to remote areas of Alaska (and
for certain interstate traffic as well). As of March 31, 1997, the Company's
long distance services were available, through the Company's network, to
approximately 90% of total Alaskan access lines. As of March 31, 1997, the
Company's residential customers were served by approximately 81,150 access
lines, representing approximately 41% of all Alaskan residential presubscribed
access lines. In addition, the Company had over 11,000 commercial, governmental
and other common carrier customers who were served by approximately 57,600
access lines, representing approximately 48% of all non-residential
presubscribed access lines in the State. The Company believes its network costs
are significantly lower than those of its principal competitor, AT&T Alascom
(the other leading long distance provider in Alaska), which, until it was
acquired by AT&T Corp. ("AT&T") in August 1995, had benefitted from an annual
direct subsidy from AT&T of approximately $80 million.

In 1993, the Company entered into a significant business relationship with
MCI Telecommunications Corp., a subsidiary of MCI Communications Corporation
(together with its subsidiaries, "MCI"), pursuant to which, among other things,
the Company agreed to provide transmission services for substantially all
Alaska-bound MCI long distance traffic and MCI agreed to provide transmission
services for substantially all of the Company's long distance traffic
terminating in the lower 49 states (excluding Washington, Oregon and Hawaii). As
of May 15, 1997, MCI owned 22.6% of Parent's total combined outstanding Class A
common stock, no par value ("Class A Common Stock") and Class B common stock, no
par value ("Class B Common Stock" and, together with the Class A Common Stock,
the "Common Stock"), and 19.4% after giving effect to the Stock Offering, the
majority of which was acquired concurrently with entering into the 1993
agreements. MCI presently controls nominations to two seats on Parent's board of
directors (the "Board") pursuant to a voting agreement among MCI and certain
other shareholders (the "Voting Agreement") that was entered into in connection
with the Company's acquisition of cable television systems (the "Cable Systems")
from several unrelated sellers. In 1993, the Company also entered into an
agreement with an affiliate of Sprint Corp. ("Sprint"), pursuant to which the
Company agreed to provide transmission services for all Alaska-bound Sprint long
distance traffic and Sprint agreed to handle substantially all of the Company's
international traffic.

The Company's telecommunications services revenues for the three months
ended March 31, 1997 were $39.2 million and operating cash flow (or EBITDA as
defined below) was $3.4 million (including $0.6 million of start-up losses from
the Company's local exchange and PCS operations), or approximately 8.7% of
telecommunications services revenues for the period. The Company's
telecommunications services revenues for the year ended December 31, 1996 were
$155.4 million and EBITDA was $21.4 million (including $0.9 million of start-up
losses for the Company's local exchange and PCS operations), or approximately
13.8% of telecommunications services revenues for the period. In the five-year
period ended December 31, 1996, the Company's telecommunications services
revenues grew at a compounded annual rate of approximately 15.5%.

Effective October 31, 1996, the Company became the leading cable television
services provider in Alaska upon its acquisition of the Cable Systems for total
consideration of approximately $280.1 million. The Cable Systems serve 21
communities and areas in Alaska, including the state's three largest urban
areas, Anchorage, Fairbanks and Juneau. As of March 31, 1997, the Cable Systems
passed 162,711 homes or approximately 70% of all households in Alaska and served
approximately 104,400 subscribers (92,940 equivalent basic subscribers),
representing 64% of households passed by the Cable Systems.

5
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As of March 31, 1997, the Cable Systems consisted of approximately 1,765 miles
of installed cable plant having between 300 and 450 MHz of channel capacity. See
"Business--Cable Television." The Cable Systems generated combined revenues for
the year ended December 31, 1996 of $55.3 million and combined EBITDA before
management fees of $27.0 million, or 48.8% of cable revenues. On a pro forma
basis, assuming the Cable Systems had been acquired by the Company as of January
1, 1996, revenues and EBITDA from cable services would have represented 26.3%
and 55.7%, respectively, of the Company's pro forma consolidated revenues and
EBITDA for 1996. During the five-year period ended December 31, 1996, the Cable
Systems achieved compounded annual revenue growth of approximately 4.1% on a pro
forma historical combined basis.

In connection with its acquisition of the Cable Systems, the Company entered
into a management agreement (the "Prime Management Agreement") with Prime II
Management, L.P. ("Prime Management"), a Delaware limited partnership affiliated
with certain sellers of the Cable Systems serving Anchorage and other areas (the
"Prime Sellers") to manage the Cable Systems. Under the Prime Management
Agreement, the Company will pay to Prime Management a net annualized fee for
managing the Cable Systems in the amount of $1,000,000 for the year ending
October 31, 1997, $750,000 for the year ending October 31, 1998, and $500,000
for each year ending October 31 thereafter that the Prime Management Agreement
is in effect. The Prime Management Agreement has a term of nine years but either
party may terminate the agreement in its discretion after October 31, 1998.
Certain of the Prime Sellers which are parties to the Voting Agreement (the
"Voting Prime Sellers") have the right to nominate two Board members pursuant to
the Voting Agreement, and will own approximately 18.0% of the total outstanding
Common Stock after giving effect to the Stock Offering.

In providing cable service, the Company competes principally with
traditional television broadcasters, direct broadcast satellite television
("DBS") and wireless cable or multichannel, multipoint distribution service
("MMDS") providers. The receipt of DBS signals in Alaska currently has the
disadvantage of requiring subscribers to install larger satellite dishes
(generally three to six feet in diameter) than are generally required in the
lower 48 states because of the weaker satellite signals available in northern
latitudes. In addition, existing satellites (situated over the equator) have a
relatively low altitude above the horizon when viewed from Alaska, making their
signals subject to interference from mountains, buildings and other structures.
MMDS also requires that customers' receiving antennas have line-of-sight access
to transmitting radio towers, and both MMDS and DBS signals are subject to
interference from rain, snow, and wind.

BUSINESS STRATEGY

The Company's goal is to become the first significant provider of integrated
voice, video and data services in Alaska while maximizing growth in its revenues
and net income. The Company's strategies to achieve this objective fall
generally into four broad categories: (i) integrate the Company's
telecommunications and cable operations, (ii) expand the scope of the Alaskan
voice, video and data markets that the Company will address, (iii) increase the
Company's penetration of these markets, and (iv) improve the Company's
consolidated operating margins and utilization of the Company's capital
resources. These broad strategies are discussed below. The Company's strategic
focus over the next several years will be on Alaska. On a longer term basis, the
Company may consider growth opportunities outside Alaska, especially in areas of
the world with demographics and infrastructure characteristics similar to those
of Alaska.

INTEGRATE TELECOMMUNICATIONS AND CABLE OPERATIONS

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coordinate the marketing of its telecommunications and cable services to the
full range of the Company's customers, promote introduction of new products and
services, leverage consumer awareness of the GCI brand name and provide its
customers with a single bill and point-of-contact for customer service. The
Company estimates that the essential elements of this integration will be
completed by late 1997.

EXPAND ADDRESSABLE MARKET

As a result of its acquisition of the Cable Systems, the Company has
expanded its addressable market in Alaska to include both long distance and
cable services, which markets generated approximately $450 million in revenues
in 1996 for all providers of such services in Alaska. Following its introduction
of local exchange and wireless services, the Company's addressable market will
expand to approximately $800 million in total.

The Company intends to offer local exchange services in Anchorage and other
major Alaskan population centers principally using its own network facilities.
The Company expects to provide local exchange services initially in Anchorage in
the second half of 1997. The Company has installed 38 miles of a planned
130-mile fiber optic network in Anchorage, has installed a Lucent 5ESS switch
with both local and long distance capabilities and has entered into an agreement
with the incumbent LEC, Anchorage Telephone Utility ("ATU"), to interconnect the
Company's network with that of ATU and to purchase unbundled local loops
necessary to provide local service. The Alaskan local service market generated
approximately $320 million in revenues in 1996, approximately 32% of which were
attributable to Anchorage. The Company anticipates expanding its local service
to the Fairbanks and Juneau markets during 1998 and to other markets during
1999, subject to negotiating acceptable interconnection arrangements with the
LECs serving those markets and to obtaining the necessary regulatory approvals.

The Company plans to enter the facilities-based wireless communications
market through development of a PCS network. The Company believes that PCS
technology, if successfully implemented, will offer advantages over existing
analog cellular technology, such as superior audio quality, additional features,
better compatibility with wireline services, and longer battery life. PCS
technology is particularly suited for use in Alaska, which has relatively small,
dense population clusters in many geographically remote areas. The Company
estimates that the Alaskan cellular services market generated approximately $35
million in total revenues in 1996.

INCREASE PENETRATION OF ALL MARKET SEGMENTS

The Company believes that by offering a variety of branded
telecommunications and cable services, by increasing consumer awareness and
leveraging brand equity, and by emphasizing customer service and rewarding
consumer loyalty, it will be well-positioned to improve customer retention rates
and to increase its market share in all service categories. The Company believes
that substantially all of its long distance and cable television customers are
potential wireless and local service customers. Cross-selling opportunities also
exist between the Company's long distance customers and its cable customers. The
Company estimates that, as of March 31, 1997, approximately 59% of the Company's
residential cable subscribers did not obtain long distance service from the
Company and that approximately 23% of the Company's total long distance
customers and 27% of the Company's residential long distance customers were
passed by the Cable Systems but did not buy cable service.

The Company plans significant upgrades to the existing cable plant in order
to expand channel capacity, add new services, improve network quality and
reliability and reduce theft. The Company expects that, by expanding customers'
service options, it will attract new customers, increase average revenue per
subscriber and reduce customer attrition rates. Currently, the Cable Systems
have between 300 and 450 MHz of channel capacity, or enough capacity to carry
between 36 and 60 channels. Over

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the next two years, the Company plans to increase the capacity of the Cable
Systems to between 450 and 550/750 MHz of channel capacity, or enough capacity
to carry between 60 and 76 channels.

The Company plans to begin offering cable modems in the fourth quarter of
1997. Cable modems represent a new technology which offers significantly faster
access to the Internet and other on-line data services than other currently
available technologies. The Company believes that Alaskans have a greater
propensity to access the Internet than consumers in other states for a variety
of reasons. Alaskans on average have completed more years of formal education
and have a higher per capita income and mean household income than the U.S.
average. Purchasing power is also enhanced by the lack of a state income tax and
the annual Permanent Fund dividend that each resident, regardless of age,
receives from the State (over $1,100 per person in 1996). In markets outside of
Anchorage, Fairbanks and Juneau, the limited availability of traditional sources
of information such as libraries, universities and museums contribute to heavy
use of the Internet as an information, education and communication resource. In
addition to offering cable modems, the Company plans to offer certain
specialized telecommunications services to support distance education and
telemedicine in rural areas of the State. Rural Alaskans often do not have
access to medical professionals within their community and the use of a
communication network to deliver a wide range of telemedical services (voice,
video and data) enhances the quality and timeliness of the services delivered
while concurrently reducing the overall cost of delivery. Likewise, the
educational infrastructure is limited in many areas of rural Alaska and distance
education services are being deployed to provide specialized curricula to
smaller village schools. Like telemedical services, distance education services
both improve the quality of education and reduce the cost of delivery.

IMPROVE CONSOLIDATED OPERATING MARGINS AND CAPITAL UTILIZATION

The Company believes that the combination of its long distance, local,
wireless communications and cable operations will enable it to achieve better
overall operating margins than would be possible if these operations were
managed as stand-alone enterprises. The Company expects to achieve certain
efficiencies by combining the marketing, sales, customer service, MIS and
administrative organizations of the Cable Systems with each other and with those
of the Company's preexisting operations. The Company also expects that its
planned provision of local services, while a potentially significant source of
revenues, will coincidentally result in a significant reduction in the Company's
local access fees paid to Alaskan LECs. Access fees charged to the Company by
incumbent Alaskan LECs for the use of their local networks to originate or
terminate long distance calls totaled $36.4 million in 1996, or approximately
28.2% of the Company's long distance revenues for this period. The Company
estimates that the average access charge payable by it to Alaskan LECs for
originating or terminating interstate access is approximately $0.043 per minute
of traffic and for originating or terminating intrastate access is approximately
$0.07 per minute of traffic (or a total of $0.14 for both originating and
terminating access).

In addition, the Company expects to leverage its investment in existing
cable plant and rights-of-way by, in some cases, overlaying (or using existing)
fiber optic cable for telephony or PCS applications. The incremental cost of
such network enhancements, especially when combined with planned upgrades to the
existing cable plant, is significantly less than the cost of building entirely
new network facilities.

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THE OFFERING

<TABLE>
<S> <C>
Securities Offered.......... $150,000,000 principal amount of % Senior
Notes due 2007 (the "Notes").

Maturity.................... The Notes will mature on , 2007.

Interest Payment Dates...... Interest on the Notes is payable semiannually on
each and commencing
, 1997.

Optional Redemption......... The Notes will be redeemable at the option of the
Issuer, in whole or in part, at any time on or
after , 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest, if
any, to the date of redemption. In addition, prior
to ,2000, the Issuer may use the net cash
proceeds of one or more Public Equity Offerings
(as defined) to redeem up to 33 1/3% of the
initially issued aggregate principal amount of the
Notes at a redemption price of % of the
aggregate principal amount thereof, together with
accrued and unpaid interest thereon to the date of
redemption; provided that not less than $100
million aggregate principal amount of the Notes
remains outstanding following any such redemption.
See "Description of Notes--Optional Redemption."

Sinking Fund................ None.

Change of Control........... Upon a Change of Control, the Issuer will be
required to make an offer to purchase the Notes at
a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest,
if any, to the date of purchase. See "Description
of Notes--Mandatory Offer to Purchase Upon a
Change of Control."

Ranking..................... The Notes are senior unsecured obligations of the
Issuer, ranking PARI PASSU with other
unsubordinated, unsecured indebtedness of the
Issuer, and ranking senior in right of payment to
any future subordinated indebtedness of the
Issuer. The Notes will be structurally
subordinated to all liabilities of the Issuer's
subsidiaries, including the Credit Facility (as
defined). See "Description of Credit Facility." As
of March 31, 1997, after giving effect to the
Offerings and the application of the net proceeds
therefrom, the total indebtedness and total
liabilities (including trade payables and accrued
liabilities) of such subsidiaries, on an aggregate
basis, would have been approximately $93.8
million, of which $23.5 million would have been
indebtedness. As of the date of this Prospectus,
the Issuer had no indebtedness that would have
been subordinated to the Notes. The Issuer's
subsidiaries expect to incur significant
additional indebtedness and other liabilities in
the future. See "Risk Factors--Substantial
Leverage; Ability to Service Debt," "--Holding
Company Structure" and "Description of Notes."
</TABLE>

9
<PAGE>

<TABLE>
<S> <C>
Certain Covenants........... The Indenture for the Notes will contain
limitations on, among other things, (a) the
ability of the Issuer and its Restricted
Subsidiaries to incur additional Indebtedness, (b)
the payment of dividends and other distributions
with respect to the Capital Stock of the Issuer
and the purchase, redemption or retirement of
Capital Stock and subordinated Indebtedness of the
Issuer, (c) the incurrence of certain Liens, (d)
the ability of the Issuer to allow restrictions on
distributions by Restricted Subsidiaries, (e)
Asset Sales, (f) transactions with Affiliates and
(g) certain consolidations, mergers and transfers
of assets. All of these limitations are subject to
a number of important qualifications. See
"Description of Notes--Certain Covenants" and
"--Certain Definitions."

Use of Proceeds............. The net proceeds of the Debt Offering
(approximately $145.0 million) will be used to
reduce borrowings outstanding under the Credit
Facility and to contribute or advance
approximately $40 million to GCI Transport
Company, an Unrestricted Subsidiary, as defined in
the indenture entered into in connection with the
Notes (the "Indenture"). The Company expects to
reborrow funds under the Credit Facility in the
future to fund capital expenditures and for other
general corporate purposes, including possible
acquisitions and other investments. See "Use of
Proceeds."

Concurrent Offerings........ Concurrently with the Debt Offering, Parent is
offering 13.8 million shares of Class A Common
Stock (including approximately 6.8 million shares
for the account of certain selling shareholders of
Parent). The Debt Offering and the Stock Offering
are not conditioned upon one another and,
therefore, one Offering may be consummated without
the other Offering being consummated. The Debt
Offering is contingent upon the Company
refinancing its existing credit facilities. See
"Risk Factors--Significant Capital Requirements;
Concurrent Offerings; Refinancing of Existing
Credit Facilities," "Use of Proceeds" and
"Description of Credit Facility."
</TABLE>

RISK FACTORS

See "Risk Factors" for a discussion of certain factors that should be
considered by prospective purchasers of the Notes.

10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE, PER MINUTE AND PER SUBSCRIBER DATA)

The following table summarizes certain summary consolidated financial and
operating data of the Company and should be read in conjunction with, and is
qualified by reference to, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements of
the Company, the notes thereto and other financial data included elsewhere in
this Prospectus. The unaudited pro forma financial information reflects the
acquisition of the Cable Systems as if such acquisition had been consummated as
of January 1, 1996. See the Unaudited Pro Forma Combined Statement of Operations
included elsewhere in this Prospectus. The unaudited pro forma information
should be read in conjunction with the financial statements of Prime Cable of
Alaska, L.P., Alaska Cablevision, Inc. and the three corporations comprising
"Alaskan Cable" (Alaskan Cable Network/Fairbanks, Inc., Alaskan Cable
Network/Juneau, Inc., and Alaskan Cable Network/Ketchikan-Sitka, Inc.) and the
notes thereto included elsewhere in this Prospectus. See "Index to Financial
Statements."

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
----------------------------------------------- PRO FORMA ------------------------
1992 1993 1994 1995 1996 1996 (1) 1996 1997
------- -------- -------- -------- -------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

OTHER FINANCIAL DATA:

Capital expenditures.......... $ 4,396 $ 5,744 $ 10,604 $ 8,938 $ 38,642 $ 45,718 $ 6,950 $ 9,529
Depreciation and
amortization................ 7,486 6,978 6,639 5,993 9,409 20,553 1,887 6,120
Cable operating income........ -- -- -- -- 2,196 12,660 -- 2,528
Cable EBITDA (3).............. -- -- -- -- 4,416 26,025 -- 6,025
Consolidated EBITDA (3)....... 12,755 15,782 19,636 19,497 25,818 47,426 5,834 9,412
Restricted Group
EBITDA (3)(4)............... $12,755 $ 15,782 $ 19,636 $ 19,497 $ 25,818 $ 47,426 $ 5,834 $ 9,412

OTHER OPERATING DATA:

Long distance (minutes in
thousands)
Interstate minutes of use... 333,009 364,906 406,751 458,131 562,084 562,084 131,621 147,568
Intrastate minutes of use... 64,387 70,107 79,641 93,370 121,208 121,208 28,910 31,537
International minutes of
use....................... 4,304 4,251 5,318 6,385 7,524 7,524 1,890 1,738
------- -------- -------- -------- -------- ---------- ----------- ----------
Total minutes of use........ 401,700 439,264 491,710 557,886 690,816 690,816 162,421 180,843
------- -------- -------- -------- -------- ---------- ----------- ----------
------- -------- -------- -------- -------- ---------- ----------- ----------
Average revenue per
minute.................... $ 0.184 $ 0.182 $ 0.186 $ 0.188 $ 0.179 $ 0.179 $ 0.184 $ 0.173
Cable (period-end data)
Homes passed (5)............ -- -- -- -- 162,395 162,395 -- 162,711
Equivalent basic
subscribers (6)........... -- -- -- -- 93,391 93,391 -- 92,940
Basic penetration (7)....... -- -- -- -- 57.5% 57.5% -- 57.1%
Premium service units (8)... -- -- -- -- 77,609 77,609 -- 75,521
Premium penetration (9)..... -- -- -- -- 83.1% 83.1% -- 81.3%
Average monthly revenue per
equivalent basic
subscriber (10)........... -- -- -- -- $ 50.73 $ 50.73 $ 48.98
</TABLE>

11
<PAGE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-----------------------------------------------------------------
AS ADJUSTED AS ADJUSTED AS ADJUSTED
FOR DEBT FOR STOCK FOR BOTH
ACTUAL OFFERING ONLY OFFERING ONLY OFFERINGS
--------- ------------------ ------------------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................... $ 442,878 $ 447,878 $ 442,878 $ 447,878
Short-term debt and capital leases (including
current maturities).......................... 32,012 1,721 1,721 1,721
Long-term debt and capital leases (excluding
current maturities).......................... 181,528 216,819 166,819 171,819
Total stockholders' equity..................... $ 159,095 $ 159,095 $ 204,095 $ 204,095
</TABLE>

- ------------------------------

(1) The Cable Systems were acquired effective October 31, 1996. Pro forma data
reflect the acquisition of the Cable Systems as if it had occurred on
January 1, 1996. See the Unaudited Pro Forma Combined Statement of
Operations included elsewhere in this Prospectus.

(2) The ratio of earnings to fixed charges is computed by dividing pre-tax
earnings or loss (plus fixed charges, amortization of capitalized interest,
and minus interest capitalized during the period) by the sum of the total
interest, amortization of deferred loan costs, and one-third of rental
expense characterized as interest, all incurred during the period.

(3) As used herein, EBITDA consists of earnings before interest (net), income
taxes, depreciation, amortization and other income (expense). EBITDA is a
measure commonly used in the telecommunications and cable television
industries to analyze companies on the basis of operating performance. It is
not a measure of financial performance under GAAP and should not be
considered as an alternative to net income as a measure of performance nor
as an alternative to cash flow as a measure of liquidity.

(4) Represents consolidated EBITDA for the Issuer and its Restricted
Subsidiaries (as defined in the Indenture).

(5) Dwellings and commercial establishments that are or can be connected to the
distribution system of a cable system without further extension of the
transmission lines of that cable system.

(6) A number representing the sum of (a) residential customers receiving at
least the entry level of cable television service offered by a system
("Basic Service") at the system's standard residential rate for Basic
Service plus (b) for customers receiving Basic Service under bulk billing
arrangements at a rate less than the system's standard residential rate for
Basic Service (including multi-unit residential complexes, hotels, motels
and hospitals), the number derived by dividing the monthly amount billed to
all such subscribers for Basic Service by the monthly standard residential
rate for Basic Service.

(7) Equivalent basic subscribers divided by homes passed.

(8) Premium programming services selected by and sold to subscribers on an a la
carte or packaged basis for monthly fees in addition to the fee for Basic
Service. All customers who are listed as "premium service units" are also
included in "equivalent basic subscribers."

(9) Premium service units divided by equivalent basic subscribers.

(10) Total subscriber revenues for the year from the sale of cable television
services divided by average total equivalent basic subscribers divided by
12.

12
<PAGE>
SUMMARY UNAUDITED COMBINED HISTORICAL AND
PRO FORMA CABLE SYSTEM FINANCIAL AND OPERATING DATA (1)
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)

The following table sets forth summary unaudited combined historical and pro
forma financial and operating data of Prime Cable of Alaska, L.P., the three
corporations comprising "Alaskan Cable" (Alaskan Cable Network/Fairbanks, Inc.,
Alaskan Cable Network/Juneau, Inc., and Alaskan Cable Network/Ketchikan-Sitka,
Inc.) and Alaska Cablevision, Inc. (collectively, the "Cable Companies") on an
aggregate basis for the periods indicated. The data does not include financial
information for McCaw/ Rock Homer Cable Systems, J.V. and McCaw/Rock Seward
Cable Systems, J.V., as the Cable Systems acquired from them together accounted
for approximately 0.1% of the Company's assets and 0.6% of the Company's
revenues as of and for the year ended December 31, 1996, and audited financial
statements are not available for them. As discussed more fully in note (1) to
this table, the data below have not been prepared in accordance with generally
accepted accounting principles. Prior to their acquisition effective October 31,
1996 by the Company, the Cable Companies were owned and operated by various
unrelated persons. The results of operations had the Cable Companies actually
been combined during the periods presented might have differed materially from
those presented on a combined basis below. Moreover, the results of operations
for those periods are not necessarily indicative of the results of operations of
the Cable Companies after their acquisition by the Company. The summary
unaudited combined historical data has been derived from the separate audited
financial statements of each of the Cable Companies. The following data should
be read in conjunction with the audited financial statements, related notes
thereto, management's discussion and analysis of the financial condition and
results of operations of the individual Cable Companies and the Unaudited Pro
Forma Combined Statement of Operations included elsewhere in this Prospectus.
See "Index to Financial Statements."

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------- PRO FORMA
1993 1994 1995 1996 (2)
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues................................ $ 48,903 $ 50,191 $ 53,029 $55,343
Operating, selling, general and
administrative expenses (3)(4)........ 50,235 50,992 52,465 42,683
Operating income (loss) (3)(4).......... $ (1,332) $ (801) $ 564 $12,660

OTHER FINANCIAL DATA:

Total assets (period-end)............... $133,648 $121,346 $101,941 $ --(5)
Capital expenditures.................... 9,156 6,309 6,659 7,925
EBITDA (before management fees) (6)..... $ 25,037 $ 25,024 $ 25,946 $27,025

OTHER PERIOD-END OPERATING DATA: (7)

Homes passed............................ 154,645 157,278 159,486 162,395
Equivalent basic subscribers............ 87,780 92,623 94,502 93,391
Basic penetration....................... 56.8% 58.9% 59.3% 57.5%
Average monthly revenue per equivalent
basic subscriber...................... $ 46.63 $ 45.16 $ 46.76 $ 50.73
</TABLE>

- ------------------------------

(1) The unaudited combined data set forth above have not been prepared in
accordance with generally accepted accounting principles ("GAAP"), which do
not allow for the combination of financial data for entities that are not
under common ownership. The Company believes that such unaudited combined
information is meaningful because: (i) the Company's cable operations will
constitute a separate industry segment pursuant to Statement of Financial
Accounting Standard No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS
ENTERPRISE, (ii) analysis of the combined cable operations on a historical
basis will serve as a bridge between historical results and future
disclosures which will be required of the Company and (iii) the acquired
cable operations will represent a significant percentage of consolidated
revenues and, more importantly, will

13
<PAGE>
contribute approximately half of the Company's operating cash flow. The
Company believes that potential investors should understand the significance
of the cable operations to future operating results and would therefore
benefit from a presentation of cable operating data on a combined basis.

(2) Represents pro forma data for the Cable Companies as if they had been
combined at January 1, 1996. This column includes certain adjustments
primarily relating to intangible assets, depreciation, amortization,
interest expense and management fees. See "Selected Unaudited Combined
Historical and Pro Forma Cable System Financial and Operating Data" and the
Unaudited Pro Forma Combined Statement of Operations.

(3) Includes management fees paid by the Cable Companies in the amounts of
$2,311,000, $2,475,000, $2,299,000 and $2,166,000 in 1993, 1994, 1995 and
1996 under management agreements in existence prior to the Company's
acquisition of the Cable Systems. These fees will not be relevant to the
Company's ongoing cable operating results. Under the Prime Management
Agreement, the Company will pay Prime Management a net annualized fee for
managing the Cable Systems in the amount of $1,000,000 for the year ending
October 31, 1997, $750,000 for the year ending October 31, 1998 and $500,000
for each year ending October 31 thereafter that the Prime Management
Agreement is in effect. See "Business--Cable Television."

(4) Includes depreciation and amortization.

(5) Not applicable.

(6) As used herein, EBITDA consists of earnings before interest (net), income
taxes, depreciation, amortization and other income (expense). EBITDA is a
measure commonly used in the cable industry to analyze and compare cable
television companies on the basis of operating performance, leverage and
liquidity. However, EBITDA does not purport to represent cash flows from
operating activities in related Statements of Cash Flows and should not be
considered in isolation or as a substitute for measures of performance in
accordance with GAAP. EBITDA as presented does not include any adjustments
for selling, general and administrative cost savings that management
anticipates achieving, compared to predecessors' costs, from the combination
of the Cable Companies. There can be no assurance that the expected cost
savings will be achieved.

(7) All statistics are approximate.

14
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION AND FINANCIAL DATA SET FORTH ELSEWHERE
IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING RISK
FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE NOTES
OFFERED HEREBY.

SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT

The Company has substantial leverage. As of March 31, 1997, on an as
adjusted basis after giving effect to the Offerings and the application of the
net proceeds therefrom, the total consolidated indebtedness of the Issuer would
have been $173.5 million (or 46.0% of the total capitalization of the Issuer and
its subsidiaries) and the total liabilities of the Issuer's subsidiaries
(including trade payables and accrued liabilities) would have been approximately
$93.8 million, of which $23.5 million would have been indebtedness. As of March
31, 1997, after giving effect to the Debt Offering only and the application of
the net proceeds therefrom, the total consolidated indebtedness of the Issuer
would have been $218.5 million (or 57.9% of the total capitalization of the
Issuer and its subsidiaries) and the total liabilities of the Issuer's
subsidiaries (including trade payables and accrued liabilities) would have been
approximately $138.8 million, of which $68.5 million would have been
indebtedness. See "Capitalization." The degree to which the Company is leveraged
may adversely affect the Company's ability to finance its future operations, to
compete effectively against better capitalized companies and to withstand
downturns in its business or the economy generally, and could limit its ability
to pursue business opportunities that may be in the best interests of the
Company and its security holders. Following the Offerings, the Company's
subsidiary, GCI Holdings, Inc. ("Holdings"), will have approximately $________
million of available borrowings under the Credit Facility, subject to certain
limitations, and it expects to continue to borrow funds under such facility. The
Credit Facility is secured by substantially all of the assets of the Company and
is structurally senior to the Notes. See "--Holding Company Structure" and
"Description of Credit Facility."

The Credit Facility and the Notes impose restrictions on the operations and
activities of the Company. Generally, the most significant restrictions relate
to debt incurrence, investments, capital expenditures, sales of assets and the
use of proceeds therefrom and cash distributions from the Company. These
restrictions require the Company to comply with certain financial covenants
including financial ratios. The restrictions in the Indenture will be subject to
a number of important qualifications and exceptions. As long as the Issuer and
its Restricted Subsidiaries (as defined in the Indenture) comply with specified
leverage ratios, the Issuer and its Restricted Subsidiaries are permitted to
incur an unlimited amount of additional indebtedness to finance the acquisition
of telecommunications and cable assets, equipment and inventory and for capital
expenditures and working capital for the telecommunications and cable businesses
and up to $90.0 million of other indebtedness. The Indenture also permits the
Issuer to secure any such indebtedness, subject to equally and ratably securing
the Notes. The ability of Holdings to comply with the restrictions and covenants
in the Credit Facility, and of the Issuer to comply with the restrictions and
covenants in the Indenture, will be dependent upon the Company's future
performance and various other factors, including factors beyond its control. If
the Issuer fails to comply with the restrictions and covenants in the Indenture
or if Holdings fails to comply with the restrictions and covenants in the Credit
Facility, the Issuer's obligation to repay the Notes and Holdings' obligation to
repay its indebtedness under the Credit Facility may be accelerated. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Description of Credit Facility"
and "Description of Notes--Certain Covenants."

The ability of the Issuer to repay the Notes at maturity depends in part on
the Issuer's ability to generate cash flows from operations at currently
anticipated levels. Should the Issuer's operating cash flows fall below the
levels required to generate sufficient funds to repay the Notes, the Notes may
need to be refinanced. The Issuer's ability to refinance the Notes will depend
upon, among other things, its financial condition at the time, the restrictions
in the agreements governing its and its subsidiaries'

15
<PAGE>
indebtedness and other factors, including market conditions. There can be no
assurance that any such refinancing will be possible on terms that would be
acceptable to the Issuer or that any additional financing could be obtained. If
such refinancing were not possible, or if additional financing were not
available, the Issuer could be forced to dispose of assets under circumstances
that might not be favorable to realizing the highest price for them or could be
in default on its obligations with respect to its indebtedness. See "Description
of Credit Facility."

HOLDING COMPANY STRUCTURE

The Notes will be obligations exclusively of the Issuer and not of Parent or
the Issuer's subsidiaries. The Issuer is a holding company with no material
business operations or sources of income or assets of its own other than the
stock of its subsidiaries. The Issuer and Holdings must rely on dividends, loan
repayments and other intercompany cash flows from their subsidiaries to generate
the funds necessary to meet their debt service obligations, including the Notes.
The Credit Facility is guaranteed by all of the subsidiaries of Holdings and
limits the ability of Holdings' subsidiaries to pay dividends or make loans or
other distributions to Holdings, the Issuer or Parent. See "Description of
Credit Facility." The ability of Holdings' subsidiaries to pay dividends to
Holdings is also limited by provisions of the Alaska Corporations Code.

The Notes will be effectively subordinated to indebtedness under the Credit
Facility, to any other secured indebtedness that Parent, the Issuer or Holdings
hereafter incurs and to all other liabilities and commitments of the Issuer's
subsidiaries, including trade payables and lease obligations. In the event of a
default on the Notes or a bankruptcy, liquidation or reorganization of the
Issuer, the assets of the Issuer will be available to satisfy its secured
obligations before any payment could be made on the Notes. Accordingly, there
may be a limited amount of assets available to satisfy any claims of the holders
of the Notes upon an acceleration of the Notes. Any right of the Company to
participate in the distribution of assets of a subsidiary upon its liquidation
or reorganization will be effectively subordinated to the claims of that
subsidiary's creditors (including tax authorities, trade creditors, and lenders
to those subsidiaries). As of March 31, 1997, after giving effect to the
Offerings, the Issuer's subsidiaries would have had approximately $93.8 million
of total liabilities, of which $23.5 million would have been indebtedness. As of
March 31, 1997, after giving effect to the Debt Offering only, the Issuer's
subsidiaries would have had approximately $138.8 million of total liabilities,
of which $68.5 million would have been indebtedness. The Indenture will permit
the Issuer's subsidiaries to incur substantial additional liabilities and
indebtedness. See "Description of Notes."

SIGNIFICANT CAPITAL REQUIREMENTS; CONCURRENT OFFERINGS; REFINANCING OF EXISTING
CREDIT FACILITIES

Development and expansion of the Company's telecommunications and cable
operations will require substantial capital. The Company estimates that its
aggregate capital requirements for the next five years will be approximately
$480 million, including approximately $170 million for the purchase of new
satellite transponders and the construction of new undersea fiber optic cable
facilities through GCI Transport Company, an Unrestricted Subsidiary under the
Indenture. The Company's estimated capital requirements include, among other
things, the estimated costs (i) to continue the expansion of the Company's long
distance facilities and services; (ii) to develop and deploy the Company's entry
into local exchange services and its PCS network; and (iii) to upgrade, expand
and integrate the Cable Systems into its telecommunications services business.
The Company expects that the net proceeds from the Offerings, together with
internally generated cash flows and borrowings under the Credit Facility and its
separate committed financing facility for GCI Transport Company, will provide
sufficient funds for the Company to expand its business as currently planned.
The amount of the Company's future capital requirements will depend upon many
factors, however, including regulatory, technological

16
<PAGE>
and competitive developments in the telecommunications and cable television
industries, and may differ materially from the Company's estimates.

Concurrently with the Issuer's offering of the Notes, Parent is separately
offering approximately 7.0 million shares of Class A Common Stock pursuant to
the Stock Offering (excluding approximately 6.8 million shares for the account
of certain selling shareholders). Consummation of one Offering is not contingent
upon consummation of the other Offering, and there can be no assurance that the
Stock Offering will be consummated and, if so, on what terms. Without the
proceeds from the Stock Offering, the Company may have to seek alternative
financing for a portion of its business plan. In particular, if the Stock
Offering is not consummated, the Company may need to obtain additional financing
for its planned purchase of seven transponders on the Galaxy X satellite that is
expected to be launched in mid-1998. In addition, the Company may be required to
seek additional capital if its actual capital requirements exceed its estimates
and it is unable to generate sufficient funds internally or borrow sufficient
funds under the Credit Facility. If the Company were to require additional
financing, there can be no assurance that additional financing would be
available to the Company or, if available, that it would be on terms acceptable
to the Company. The Debt Offering is contingent upon the Company refinancing its
existing credit facilities. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Business--Business Strategy" and "Description of Credit Facility."

DEVELOPMENT AND EXPANSION RISKS

The Company's ability to become the first significant provider in Alaska of
an integrated package of telecommunications and cable television services will
depend in large part on its ability to enter into and succeed in the local
exchange service market, to establish PCS networks in Alaska, and to upgrade or
convert the Cable Systems from their present coaxial distribution system to a
hybrid fiber optic/coaxial distribution system so that additional cable and
telecommunications services can be offered and can be integrated with the
Company's existing telecommunications services. The entry into local exchange
service, the implementation of its PCS networks and the upgrade of the Cable
Systems are critical to the Company's ability to provide new services and
products to its customers. See "Business--Overview,"
"--Business Strategy" and "--PCS."

The successful implementation of the Company's expansion strategy is subject
to a variety of risks, including changes in the competitive climate in which the
Company operates, technological changes and compatibility risks, and legal and
regulatory risks (including possible delays in the full implementation of
deregulation under the federal Telecommunications Act of 1996 (the "1996 Telecom
Act")). The Company's expansion plans also depend on factors such as its ability
to obtain and maintain required governmental licenses and authorizations, its
ability to enter into interconnection agreements with established LECs, and its
ability to obtain financing, all in a timely manner, at reasonable costs and on
terms and conditions acceptable to the Company. There can be no assurance that
the Company's contemplated expansion of services will take place as planned or
that the expanded services will become profitable or generate positive cash
flows. See "Business--Business Strategy" and
"--Competition."

ABILITY TO MANAGE GROWTH

The Company's aggressive growth in telecommunication services, its
acquisition of a state-wide license for development of PCS services, and its
acquisition of cable television systems in Alaska have placed, and may continue
to place, a significant strain on the Company's administrative, operational and
financial resources and have increased demands on the Company's systems and
controls. The Company's ability to continue to manage its growth successfully
will require the Company to further enhance its operational, management,
financial and information systems and controls and to expand, train and manage
its employee base. In addition, as the Company increases its service offerings
and expands its

17
<PAGE>
targeted markets, there will be additional demands on the Company's customer
support, sales, marketing, and administrative resources and infrastructure.
There can be no assurance that the Company's administrative, operating and
financial resources, systems and controls will be adequate to effectively manage
the Company's growth. The inability of the Company to manage its growth
successfully could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business--Business
Strategy."

RELIANCE ON SIGNIFICANT CUSTOMERS

For the year ended December 31, 1996, the Company provided services to MCI
and to Sprint resulting in substantial revenues to the Company of approximately
29% of total revenues for 1996. These two customers are free to seek out long
distance communication services from competitors of the Company upon expiration
of their contracts (in 2001 in the case of MCI and in 1999 in the case of
Sprint) or earlier upon a default or the occurrence of certain other specified
conditions under the applicable contract. Loss of one or both of these major
customers, or a considerable number of other customers, would have a material
adverse effect on the financial condition and results of operations of the
Company. See "Business--Long Distance Operations."

RAPID CHANGES IN TECHNOLOGY AND CUSTOMER REQUIREMENTS

The telecommunications and cable television industries have been
characterized by rapid technological changes, frequent new service introductions
and evolving industry standards. The Company believes that its future success
will depend on its ability to anticipate such changes and to offer services that
meet these standards on a timely basis. There can be no assurance that the
Company will have sufficient resources to make necessary investments or to
introduce new services that would satisfy its customers. See
"Business--Competition."

GEOGRAPHIC CONCENTRATION AND ALASKAN ECONOMY

The Company offers a variety of voice, video and data services to
residential, commercial and governmental customers in the State of Alaska. As a
result of this geographic concentration, the Company's growth and operations
depend in part upon economic conditions in Alaska. The economy of Alaska is
dependent upon the natural resource industries, 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 the demand for
telecommunications and cable television services and on the Company's results of
operations and financial condition. In addition, the customer base in Alaska is
limited. Alaska has a population of approximately 600,000 people, approximately
one-half of whom are located in the Anchorage area. No assurance can be given
that the Alaskan economy will continue to grow and to generate increased demand
for the Company's services. See "Business--Alaskan Voice, Video and Data
Markets" and "--Alaskan Economy."

RECENT CABLE SYSTEM ACQUISITIONS

As of October 31, 1996, the Company acquired the Cable Systems for a total
purchase price of $280.1 million. On a pro forma basis, giving effect to the
acquisition of the Cable Systems as if it had occurred on January 1, 1996, the
Cable Systems' revenues and EBITDA before management fees would have comprised
26.3% of the Company's consolidated revenues and 55.7% of the Company's
operating cash flow for the year ended December 31, 1996. In acquiring the Cable
Systems, the Company obtained a substantial portion of the existing cable
television distribution systems in Alaska and gained entry into the cable
television business, in which it had no prior operating experience. In
connection with the acquisition, the Company entered into the Prime Management
Agreement with Prime Management to assist in the management of the Cable
Systems. The Company currently relies on Prime Management, which had managed the
Prime cable television systems prior to their acquisition by the Company,

18
<PAGE>
to assist in the management of the Cable Systems, and there can be no assurance
that the Company's cable television business would not be adversely affected
should Prime Management's services become unavailable. Either party may
terminate the Prime Management Agreement in its discretion after October 31,
1998. In addition, given the Company's lack of experience in the cable
television industry, there can be no assurance that the Company will achieve
improved operating results, synergies and other benefits expected as a result of
the acquisition of the Cable Systems. See "Business--Cable Television."

COMPETITION

The long distance telecommunications industry is highly competitive.
Competition in the long distance business is based upon pricing, customer
service, billing services and perceived quality. The Company's principal
competitor in long distance service, AT&T Alascom (the other leading long
distance provider in Alaska), has substantially greater resources than the
Company and its interstate rates are integrated with those of a nationwide
communications firm, AT&T Corp. While the Company initially competed in long
distance services based upon offering substantial discounts, those discounts
have been eroded in recent years due to lowering of prices by AT&T Alascom. If
competition for long distance services forces the Company to offer its services
at greater discounts, the consequent loss of revenues could have a material
adverse effect on the Company's financial condition and results of operations.

Recent changes in the regulation of the telecommunications industry may
affect the Company's competitive position as a provider of long distance
services. The 1996 Telecom Act effectively opened the local and long distance
markets to competition. Incumbent local exchange carriers may enter the market
for long distance services. In fact, the incumbent LEC in Anchorage has, as of
April 1997, begun providing long distance services in the Anchorage area on a
non-facilities-based basis. The Company is unable to predict the extent to which
this may have an adverse effect on the Company's financial condition and results
of operations.

The cable television industry is also highly competitive. In certain areas
of the United States, cable television systems face competition from other cable
operators offering cable television services in the same areas. Cable television
systems also face competition from alternative methods of receiving and
distributing television signals such as traditional broadcast television, direct
broadcast satellite systems, satellite master antennae television systems and
wireless cable systems, and from other sources of news, information and
entertainment. The extent to which a cable television system is competitive
depends, in part, upon the cable system's ability to provide quality programming
and other services at competitive prices. Recent published reports indicate that
there has been a substantial increase in the number of DBS subscribers in the
United States in recent years. Thus, although it is difficult to assess the
ultimate impact that DBS will have on the cable industry or the Company's
financial condition and results of operations, DBS services may pose a
significant competitive threat to cable television systems.

Regulatory changes may also make it easier for LECs and others, including
utility companies, to provide video services competitive with services provided
by cable systems and to provide cable services directly to subscribers. Prior to
the 1996 Telecom Act, LECs were statutorily barred from providing video services
to subscribers in their service areas, with certain exceptions. The 1996 Telecom
Act repealed this statutory telephone/cable cross-ownership prohibition, and
recognizes several multiple entry options for telephone companies to provide
competitive video programming. LECs, including the Regional Bell Operating
Companies ("RBOCs"), generally will be allowed to compete with cable operators
both inside and outside the LECs' telephone service areas with certain
limitations.

The local exchange services market is also likely to become competitive.
AT&T has announced plans to enter the local exchange services market in Alaska
on a non-facilities-based basis. The 1996 Telecom Act mandates that states allow
local exchange competition and requires LECs, among other things, to take steps
to ensure local competition by allowing adequate interconnection and network

19
<PAGE>
access to competing carriers. In addition, in the PCS industry, the Company may
face competition from other PCS providers as well as other providers offering
similar services, such as cellular carriers.

Management of the Company has no control over the possible future entry into
the Alaskan telecommunications or cable television markets of other potential
competitors, many of whom may be much larger than the Company and have much
greater resources than the Company. Aggressive competition for customers in
communities served by the Company could also result in increased marketing
expenditures by the Company. Resulting reductions in the Company's customer base
and rates and increases in the Company's costs could have a material adverse
effect on the Company's financial condition and results of operations. Because
of the high level of competition, the Company's ability to expand its operations
and increase market share is uncertain. Therefore, no assurance can be given
that the Company can achieve growth in products or revenues or that the Company
will not lose market share due to competitive pricing, greater resources of its
competitors or other factors. See "Business--Competition."

REGULATION

The Company is subject to regulation by the Federal Communications
Commission ("FCC") and by the APUC as a non-dominant provider of long distance
services. Among other regulatory requirements, the Company is required to file
tariffs with the FCC for interstate and international service, and with the APUC
for intrastate services, but such tariffs routinely become effective without
intervention by the FCC, APUC or other third parties since the Company is a
non-dominant carrier. The Company received approval from the APUC in February
1997 to provide local exchange services in and around Anchorage and Hope,
Alaska.

Military franchise requirements also affect the Company in its provision of
telecommunications and cable television services to military bases. Substantial
changes in the federal regulation of the telecommunications and the cable
television industries were accomplished through the 1996 Telecom Act which
became law in February 1996. Certain provisions of the 1996 Telecom Act could
materially affect the growth and operation of the telecommunications and cable
television industries and the services provided by the Company. Although the
1996 Telecom Act is expected to reduce regulatory burdens, the
telecommunications and cable television industries may be subject to additional
competition as a result thereof. There are numerous rulemakings that have been
and that will be undertaken by the FCC, which will interpret and implement the
1996 Telecom Act's provisions. In addition, certain provisions of the 1996
Telecom Act are not immediately effective. Furthermore, certain of the 1996
Telecom Act's provisions have been, and are likely to continue to be, judicially
challenged. The Company is unable to predict the outcome of such rulemakings or
litigation or the substantive effect (financial or otherwise) of the 1996
Telecom Act and the rulemakings on the Company. See "Business--Regulation." The
Company is also subject to federal and state regulation as a cable television
operator pursuant to the Communications Act of 1934 (the "Communications Act"),
the Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"
and, together with the 1984 Cable Act, the "Cable Acts"), all as amended by the
1996 Telecom Act. The 1992 Cable Act significantly expanded the scope of cable
television regulation on an industry-wide basis by imposing rate regulation,
carriage requirements for local broadcast stations, customer service obligations
and other requirements. The 1992 Cable Act and the FCC's rules implementing the
1992 Cable Act generally have increased the administrative and operational
expenses, and in certain instances required rate reductions for cable television
systems, and have resulted in additional regulatory oversight by the FCC and
state or local (depending on the regulatory scheme) authorities.

As an authorized local exchange service provider in parts of Alaska, the
Company is regulated as a LEC by the APUC. The APUC's February 1997 order
requires all Alaskan LECs, including the Company, to comply with several
regulatory requirements, including the filing of a local exchange service tariff
and the filing of certain annual and quarterly reports. In addition, the Company
is subject to other regulatory

20
<PAGE>
requirements, including certain obligations imposed by the 1996 Telecom Act on
all LECs, which requirements include permitting resale of LEC services, number
portability, dialing parity, interconnection and reciprocal compensation. See
"Business--Regulation."

As a PCS licensee, the Company is subject to regulation by the FCC and must
comply with certain buildout and other conditions of the license, as well as
with the FCC's regulations governing the PCS service. On a more limited basis,
the Company may be subject to certain regulatory oversight by the APUC (E.G., in
the areas of consumer protection and transfer of its license), although states
are not permitted to regulate the rates of PCS and other commercial mobile
service providers. PCS licensees may also be subject to regulatory requirements
of local jurisdictions pertaining to, among other things, the siting of tower
facilities. As a cellular reseller, the Company is deemed to be a common carrier
and is subject to the requirements of Title II of the Communications Act. In
light of the non-dominant market position of resellers, many of the obligations
traditionally imposed on common carriers are relaxed with respect to resellers.
Resellers are required to contribute to the Telecommunications Relay Services
Fund and to remit annual regulatory fees to the FCC. Cellular resellers may also
be subject to certain state requirements, although state regulation of mobile
service providers is limited in several respects by federal law. See
"Business--Regulation."

Other existing federal regulations, including copyright licensing rules, are
currently the subject of judicial proceedings, legislative hearings, and
administrative proposals which could change, in varying degrees, the manner in
which cable television systems operate. Neither the outcome of these
proceedings, nor their impact upon the cable television industry in general or
the Company's entry into that industry, can be predicted at this time. There can
be no assurance that future regulatory actions taken by Congress, the FCC or
other federal, state or local governmental authorities will not have an adverse
effect on the business, financial condition or results of operations of the
Company. See "Business-- Regulation."

CONCENTRATION OF STOCK OWNERSHIP

As of May 15, 1997, executive officers and directors of Parent and their
affiliates owned approximately 60.9% of the combined outstanding Common Stock,
representing 68.9% of the combined voting power of the Common Stock (45.4% and
59.9%, respectively, after giving effect to the Stock Offering). Certain of
these shareholders are subject to the Voting Agreement pursuant to which eight
of Parent's ten directors are currently elected (two nominations by the Voting
Prime Sellers, two nominations by MCI, two nominations by TCI-GCI, Inc., a
wholly owned subsidiary of Tele-Communications, Inc. (together with its
subsidiaries, "TCI") and one nomination by each of Mr. Duncan and Mr. Walp who
currently serve as their own nominees). MCI owns 22.6% of the combined
outstanding Common Stock as of May 15, 1997, representing 26.6% of the combined
voting power of the Common Stock (19.4% and 24.5% after giving effect to the
Stock Offering). The Voting Prime Sellers collectively own 25.7% of the combined
outstanding Common Stock, representing 13.8% of the combined voting power of the
Common Stock (18.0% and 10.3% after giving effect to the Stock Offering). TCI
expects to sell all of its shares of Common Stock in the Stock Offering and, if
it does so, it will thereafter no longer be a party to the Voting Agreement. If
TCI ceases to be a party to the Voting Agreement, each other party to the Voting
Agreement will have the right to withdraw from the Voting Agreement by giving
written notice to the other parties, although the Company does not anticipate
that any party will exercise that right.

Following the Stock Offering and assuming that TCI is the only shareholder
that ceases to be a party to the Voting Agreement the percentage of the combined
outstanding Common Stock subject to the Voting Agreement will decrease from
54.0% to 40.7% (or from 56.3% to 44.6% of the combined voting power of the
Common Stock). Not withstanding the withdrawal of TCI, the shareholders who are
party to the Voting Agreement will collectively be able to control the
management policy of the Company and all fundamental corporate actions,
including mergers, substantial acquisitions and dispositions and election of
directors to the Board. This concentration of ownership may have the effect of
delaying or

21
<PAGE>
preventing a change of control of the Company, although the Voting Agreement
does not currently cover any matters other than the election of directors. See
"Principal and Selling Shareholders" and "Management--Voting Agreement."

LACK OF PUBLIC MARKET FOR NOTES

Because the Notes are a new issue of securities, there is currently no
active trading market for the Notes. The Underwriters have advised the Company
that they presently intend to make a market in the Notes, although none of them
is obligated to do so, and each of them may discontinue any market-making
activities with respect to the Notes at any time without notice. There can be no
assurance that an active public market for the Notes will develop or be
maintained. If an active trading market for the Notes does not develop, the
market price and liquidity of the Notes may be adversely affected. See
"Underwriting."

THE COMPANY

CORPORATE BACKGROUND

The Company was founded in 1979 by Robert M. Walp and the Company's current
President and Chief Executive Officer, Ronald A. Duncan. From 1980 to 1987,
Parent was a wholly owned subsidiary of WestMarc Communications, Inc.
("WestMarc"). Parent was spun off in 1987 from WestMarc, a subsidiary of
Tele-Communications, Inc. that was itself spun off by TCI in 1984. As a result
of that spin off from WestMarc, Parent became an independent publicly held
company.

TCI acquired its stock in Parent through its ownership of WestMarc, which
was reacquired by TCI in 1990. In 1991, WestMarc provided financing to Parent in
exchange for convertible preferred stock of Parent on which dividends were paid
in shares of Class B Common Stock. That preferred stock and an outstanding
warrant were retired in 1993 in exchange for $3.8 million. Certain major
shareholders, including TCI and MCI, are parties to the Voting Agreement which
permits each of TCI and MCI to nominate two persons to the Board. TCI expects to
sell all of its shares of Common Stock in the Stock Offering and, if it does so,
it will thereafter no longer be a party to the Voting Agreement. The Company
currently expects, however, that TCI's nominees to the Board will continue as
directors of the Company following the Stock Offering, notwithstanding that TCI
would no longer have the right to nominate two directors. See
"Management--Voting Agreement" and "Principal and Selling Shareholders."

The Class A Common Stock is designated as a national market system stock on
Nasdaq, and trades under the symbol "GNCMA." The Class B Common Stock is quoted
in the over-the-counter market and is traded on a more limited basis. The Debt
Offering and the Stock Offering will be the Issuer's and Parent's first public
offerings of securities. Consummation of the Debt Offering and the Stock
Offering are not contingent on each other.

The executive offices of the Company and the Issuer are located at 2550
Denali Street, Suite 1000, Anchorage, Alaska 99503-2781, and their telephone
number is (907) 265-5600.

22
<PAGE>
CORPORATE STRUCTURE

The following chart depicts the corporate structure of the Company:

[CHART]

The Company's telecommunications operations are conducted primarily through
GCI Communication Corp., to which Parent transferred substantially all of its
assets and liabilities in 1990. The Company's telecommunications operations are
also conducted through two other subsidiaries. GCI Communication Services, Inc.
provides private network point-to-point data and voice transmission services
between Alaska, Hawaii and certain western states, and GCI Leasing Co. Inc. is
the owner of the Company's existing undersea fiber optic cable capacity. The
Company's cable operations are conducted through GCI Cable, Inc. and its
subsidiaries. GCI Transport Company and its subsidiaries have been formed to
finance the acquisition of seven transponders on the Galaxy X satellite that is
expected to be launched in mid-1998, and to finance the construction of new
undersea fiber optic cable facilities linking Anchorage and Juneau to the lower
48 states at Seattle, Washington, with a terrestrial connection to Fairbanks.
GCI Transport Company and its subsidiaries are Unrestricted Subsidiaries under
the Indenture.

The Issuer was recently formed to be the obligor on the Notes to be issued
in the Debt Offering, while GCI Holdings, Inc. was recently formed to be the
borrower under the Credit Facility. If the Debt Offering is not consummated, the
Company will not refinance its existing credit facilities, under which

23
<PAGE>
GCI Communication Corp. and GCI Cable, Inc. will remain the obligors. See
"Description of Credit
Facility."

RECAPITALIZATION

During the last several years, the Company has financed the development,
construction and expansion of its business principally through internally
generated funds and borrowings under bank credit facilities. In order to finance
a portion of the improvements to its long distance facilities and cable
television systems, as well as its entry into wireless services and local
exchange services, and to improve its operating and financial flexibility, the
Company (i) concurrently with the Offerings will refinance its existing bank
credit facilities with a new and enlarged bank credit facility (the "Credit
Facility"); (ii) through the Issuer, is offering pursuant to this Prospectus
$150,000,000 in principal amount of the Notes; and (iii) concurrently with the
Debt Offering, is offering approximately 13.8 million shares of Class A Common
Stock, of which 7.0 million shares will be for the account of Parent and 6.8
million shares will be for the account of certain selling shareholders
(collectively, the "Recapitalization"). The Company believes that its internally
generated cash flow, combined with the net proceeds of the Offerings and
borrowings under the Credit Facility and its separate committed financing
facility for GCI Transport Company, will provide sufficient funds for the
Company to satisfy its working capital requirements and capital expenditures for
the foreseeable future. However, consummation of one Offering is not contingent
upon consummation of the other Offering and there can be no assurance that the
Stock Offering will be consummated. Without the proceeds from the Stock
Offering, the Company may have to seek alternative financing for a portion of
its business plan. If the Company were to require additional financing, there
can be no assurance that additional financing would be available to the Company
or, if available, that it would be on terms acceptable to the Company. The Debt
Offering is contingent upon the Company refinancing its existing credit
facilities. See "Risk Factors--Significant Capital Requirements; Concurrent
Offerings; Refinancing of Existing Credit Facilities," "Business--Business
Strategy," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Use of Proceeds" and
"Description of Credit Facility."

RECENT ACQUISITION OF CABLE SYSTEMS

As of October 31, 1996, the Company acquired the Cable Systems from the
following unrelated cable television companies: (i) Prime Cable of Alaska, L.P.,
a Delaware limited partnership ("Prime"); (ii) three corporations comprising
"Alaskan Cable": Alaskan Cable Network/Fairbanks, Inc.; Alaskan Cable
Network/Juneau, Inc.; and Alaskan Cable Network/Ketchikan-Sitka, Inc.; (iii)
Alaska Cablevision, Inc., a Delaware corporation; (iv) McCaw/Rock Homer Cable
Systems, J.V., an Alaska joint venture; and (v) McCaw/Rock Seward Cable Systems,
J.V., an Alaska joint venture.

The total purchase price for the acquisition of the Cable Systems was $280.1
million, which included certain transaction and financing costs. The purchase
price included the issuance of approximately 14.7 million shares of Class A
Common Stock valued at $86.7 million, $72.8 million of cash, $110.6 million of
debt assumption and the issuance of $10.0 million in subordinated convertible
notes. The convertible notes were converted in accordance with their terms into
approximately 1.5 million shares of Class A Common Stock in January 1997.
Financing for the transactions consisted of a new $205 million bank credit
facility and additional capital provided by the sale of 2.0 million shares of
Class A Common Stock to MCI for $6.50 per share, a 30% premium to the $5.00 per
share market price immediately preceding the announcement of the Company's
acquisition of the Cable Systems. See "Business--Cable Television."

24
<PAGE>
USE OF PROCEEDS

The net proceeds to the Issuer from the Debt Offering are estimated to be
approximately $145.0 million, after deducting estimated underwriting discounts
and commissions and other estimated offering expenses payable by the Issuer. The
net proceeds to Parent from the Stock Offering are estimated to be approximately
$45.0 million, assuming an initial public offering price of $6.875 per share
(the closing sale price of the Class A Common Stock as of May 20, 1997) and
after deducting estimated underwriting discounts and commissions and other
offering expenses payable by Parent. Parent will not receive any of the proceeds
from the sale of Class A Common Stock by selling shareholders in the Stock
Offering.

Substantially all of the proceeds of the Offerings will initially be used to
pay down the outstanding balance under the Credit Facility and to contribute or
advance approximately $40 million to GCI Transport Company, an Unrestricted
Subsidiary under the Indenture. Amounts under the Credit Facility will be
redrawn as needed to implement the Company's five-year business plan. The Credit
Facility matures on and bears interest at . Initial borrowings
under the Credit Facility will be used to refinance the Company's $205.0 million
credit facility (the "Cable Credit Facility") and the Company's $62.5 million
senior credit facility (the "Telephony Credit Facility"). The Company's ability
to reborrow under the Credit Facility is subject to certain conditions and there
can be no assurance that the Company will be able to satisfy such conditions at
the time it desires to reborrow. See "Description of Credit Facility." Under the
Company's current five-year business plan, the Company expects to invest between
$245 and $265 million to fund expansion of long distance facilities (including
approximately $40 million for satellite transponders and approximately $130
million for new undersea fiber optic cable facilities which will be owned and
operated by GCI Transport Company); between $140 and $160 million to fund
development, construction and operating costs of its local exchange and PCS
networks and businesses; and between $65 and $85 million to upgrade its cable
television plant and to purchase equipment for new cable television services.
The precise allocation of funds for these purposes will depend on the level and
timing of the Company's internally generated cash flow, future technological,
regulatory and other developments in or affecting the Company's business, the
competitive climate and the emergence of future opportunities.

Consummation of one Offering is not contingent upon consummation of the
other Offering and there can be no assurance that the Stock Offering will be
consummated. Without the proceeds from the Stock Offering, the Company may have
to seek alternative financing for a portion of its business plan. In particular,
if the Stock Offering is not consummated, the Company may need to obtain
additional financing for its planned purchase of seven transponders on the
Galaxy X satellite that is expected to be launched in mid-1998. If the Company
were to require additional financing, there can be no assurance that additional
financing would be available to the Company or, if available, that it would be
on terms acceptable to the Company. The Debt Offering is contingent upon the
Company refinancing its existing credit facilities. See "Risk Factors--
Significant Capital Requirements; Concurrent Offerings; Refinancing of Existing
Credit Facilities," "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources," "Business--Business
Strategy" and "Description of Credit Facility."

The Company may also evaluate potential joint ventures, strategic alliances
and acquisitions. Although the Company is not currently a party to any
understandings or agreements regarding any of the foregoing, the Company may use
the Credit Facility to finance in whole or in part such joint ventures,
strategic alliances or acquisitions should attractive opportunities arise.

25
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)

The following table sets forth the consolidated capitalization of Parent and
its subsidiaries as of March 31, 1997 and as adjusted to give effect to the
Offerings and refinancing of the Company's existing credit facilities (except
for the As Adjusted for Stock Offering Only column). This table should be read
in conjunction with Parent's Consolidated Financial Statements and the notes
thereto and the other financial information included elsewhere in this
Prospectus. See "Index to Financial Statements."

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997(1)
-----------------------------------------------------
AS ADJUSTED AS ADJUSTED
FOR DEBT FOR STOCK AS ADJUSTED
OFFERING OFFERING FOR BOTH
ACTUAL ONLY (2) ONLY OFFERINGS (2)
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Short-term debt:
Current maturities of long-term debt..................... $ 31,938 $ 1,647 $ 1,647 $ 1,647
Current portion of obligations under capital leases...... 74 74 74 74
----------- ------------ ------------ ------------
Total short-term debt................................ 32,012 1,721 1,721 1,721
----------- ------------ ------------ ------------

Long-term debt (excluding current maturities):
Existing bank credit facilities.......................... 175,709 -- 161,000 --
Credit Facility.......................................... -- 61,000 -- 16,000
Notes.................................................... -- 150,000 -- 150,000
Obligations under capital leases......................... 655 655 655 655
Other long-term debt..................................... 5,164 5,164 5,164 5,164
----------- ------------ ------------ ------------
Total long-term debt (excluding current
maturities)........................................ 181,528 216,819 166,819 171,819
----------- ------------ ------------ ------------

Stockholders' equity:
Class A Common Stock 50,000,000 shares authorized;
38,159,468 shares issued and outstanding; 45,159,468 as
adjusted for Stock Offering............................ 123,498 123,498 168,498 168,498
Class B Common Stock 10,000,000 shares authorized;
4,071,490 shares issued and outstanding................ 3,432 3,432 3,432 3,432
Less cost of 202,768 shares of Class A Common Stock held
in treasury............................................ (1,039) (1,039) (1,039) (1,039)
Paid-in capital.......................................... 4,247 4,247 4,247 4,247
Retained earnings........................................ 28,957 28,957 28,957 28,957
----------- ------------ ------------ ------------
Total stockholders' equity........................... 159,095 159,095 204,095 204,095
----------- ------------ ------------ ------------
Total capitalization................................. $ 372,635 $ 377,635 $ 372,635 $ 377,635
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>

- ------------------------------

(1) Actual and pro forma consolidated capitalization for the Issuer and its
subsidiaries as of March 31, 1997 are identical in all material respects to
the actual and pro forma capitalization of Parent and its subsidiaries as of
March 31, 1997, except for the number of outstanding shares of common stock
of the Issuer.

(2) Assumes refinancing of the Company's existing credit facilities. See
"Description of Credit Facility."

26
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated financial data presented below under the captions
"Statement of Operations Data," "Other Financial Data" and "Balance Sheet Data"
for, and as of the end of, each of the years in the five-year period ended
December 31, 1996, excluding pro forma data, are derived from the Consolidated
Financial Statements of the Company, which financial statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
Consolidated Financial Statements of the Company as of December 31, 1995 and
1996, and for each of the years in the three-year period ended December 31,
1996, and the report thereon (which is based partially upon the report of other
auditors), are included elsewhere in this Prospectus. The selected unaudited
data presented below for the three-month periods ended March 31, 1996 and 1997,
and as of March 31, 1997, are derived from the Unaudited Consolidated Financial
Statements of the Company as of March 31, 1997 and for the three-month periods
ended March 31, 1996 and 1997, which are included elsewhere in this Prospectus.
The pro forma data are derived from the Unaudited Pro Forma Combined Statement
of Operations included elsewhere in this Prospectus. See "Index to Financial
Statements."

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEARS ENDED DECEMBER 31, PRO
----------------------------------------------- FORMA ----------------------------
1992 1993 1994 1995 1996 1996 (1) 1996 1997
------- -------- -------- -------- -------- -------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues
Telecommunications
services.................. $96,499 $102,213 $116,981 $129,279 $155,419 $155,419 $ 37,969 $ 39,225
Cable services.............. -- -- -- -- 9,475 55,343 -- 13,656
------- -------- -------- -------- -------- -------- ----------- ----------
Total revenues................ 96,499 102,213 116,981 129,279 164,894 210,762 37,969 52,881
Cost of sales and
services.................. 55,576 56,437 63,877 72,091 92,664 104,180 21,302 27,168
Selling, general and
administrative expenses... 28,168 29,994 33,468 37,691 46,412 59,155 10,833 16,301
Depreciation and
amortization.............. 7,486 6,978 6,639 5,993 9,409 20,553 1,887 6,120
------- -------- -------- -------- -------- -------- ----------- ----------
Operating income.............. 5,269 8,804 12,997 13,504 16,409 26,873 3,947 3,292
Interest expense (net)...... 3,745 2,089 1,316 903 3,719 15,512 260 3,949
------- -------- -------- -------- -------- -------- ----------- ----------
Net earnings (loss) before
income taxes................ 1,524 6,715 11,681 12,601 12,690 11,395 3,687 (657)
Income tax expense
(benefit)................... 634 2,764 4,547 5,099 5,228 4,695 1,550 (132)
------- -------- -------- -------- -------- -------- ----------- ----------
Net earnings (loss)........... 890 3,951 7,134 7,502 7,462 6,700 2,137 (525)
------- -------- -------- -------- -------- -------- ----------- ----------
------- -------- -------- -------- -------- -------- ----------- ----------
Net earnings (loss) per
share....................... $ 0.02 $ 0.17 $ 0.30 $ 0.31 $ 0.27 $ 0.16 $ 0.09 $ (0.01)
------- -------- -------- -------- -------- -------- ----------- ----------
------- -------- -------- -------- -------- -------- ----------- ----------
Ratio of earnings to fixed
charges (2)................. 1.29x 2.87x 4.95x 5.61x 2.52x 1.54x 4.73x 0.81x

OTHER FINANCIAL DATA:

Capital expenditures.......... $ 4,396 $ 5,744 $ 10,604 $ 8,938 $ 38,642 $ 45,718 $ 6,950 $ 9,529
Cable operating income........ -- -- -- -- 2,196 12,660 -- 2,528
Cable EBITDA.................. -- -- -- -- 4,416 26,025 -- 6,025
Consolidated EBITDA........... 12,755 15,782 19,636 19,497 25,818 47,426 5,834 9,412
Restricted Group EBITDA (3)... $12,755 $ 15,782 $ 19,636 $ 19,497 $ 25,818 $ 47,426 $ 5,834 $ 9,412
</TABLE>

27
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------------------------
AS OF DECEMBER 31, AS ADJUSTED AS ADJUSTED
----------------------------------------------------- FOR THE DEBT FOR THE STOCK
1992 1993 1994 1995 1996 ACTUAL OFFERING ONLY OFFERING ONLY
--------- --------- --------- --------- --------- --------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:

Total assets........... $ 72,351 $ 71,610 $ 74,249 $ 84,765 $ 447,335 $ 442,878 $ 447,878 $ 442,878
Short-term debt and
capital leases
(including current
maturities).......... 24,080 2,582 1,834 1,971 32,040 32,012 1,721 1,721
Long-term debt and
capital leases
(excluding current
maturities).......... 14,875 19,763 12,017 9,056 191,948 181,528 216,819 166,819
Total stockholders'
equity............... $ 13,870 $ 27,210 $ 35,093 $ 43,016 $ 149,554 $ 159,095 $ 159,095 $ 204,095

AS ADJUSTED
FOR BOTH
OFFERINGS
------------

<S> <C>
BALANCE SHEET DATA:
Total assets........... $ 447,878
Short-term debt and
capital leases
(including current
maturities).......... 1,721
Long-term debt and
capital leases
(excluding current
maturities).......... 171,819
Total stockholders'
equity............... $ 204,095
</TABLE>

- ------------------------------

(1) The Cable Systems were acquired effective October 31, 1996. Unaudited pro
forma combined data reflect the acquisition of the Cable Systems as if the
acquisition had occurred on January 1, 1996. See the Unaudited Pro Forma
Combined Statement of Operations included elsewhere in this Prospectus.

(2) The ratio of earnings to fixed charges is computed by dividing pre-tax
earnings or loss (plus fixed charges, amortization of capitalized interest,
and minus interest capitalized during the period) by the sum of the total
interest expense, amortization of deferred loan costs, and one-third of
rental expense characterized as interest, all incurred during the period.

(3) Represents consolidated EBITDA for the Issuer and its Restricted
Subsidiaries.

28
<PAGE>
SELECTED UNAUDITED COMBINED HISTORICAL AND
PRO FORMA CABLE SYSTEM FINANCIAL AND OPERATING DATA (1)
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)

The following table sets forth selected unaudited combined historical and
pro forma financial and operating data of Prime Cable of Alaska, L.P., the three
corporations comprising "Alaskan Cable" (Alaskan Cable Network/Fairbanks, Inc.,
Alaskan Cable Network/Juneau, Inc., and Alaskan Cable Network/Ketchikan-Sitka,
Inc.) and Alaska Cablevision, Inc. (collectively, the "Cable Companies") on an
aggregate basis for the periods indicated. The data does not include financial
information for McCaw/ Rock Homer Cable Systems, J.V. and McCaw/Rock Seward
Cable Systems, J.V., as the Cable Systems acquired from them together accounted
for approximately 0.1% of the Company's assets and 0.6% of the Company's
revenues as of and for the year ended December 31, 1996 and audited financial
statements are not available for them. As discussed more fully in note (1) to
this table, the data below have not been prepared in accordance with GAAP. Prior
to their acquisition by the Company effective October 31, 1996, the Cable
Companies were owned and operated by various unrelated persons. The results of
operations had the Cable Companies actually been combined during the periods
presented might have differed materially from those presented on a combined
basis below. Moreover, the results of operations for those periods are not
necessarily indicative of the results of operations of the Cable Companies after
their acquisition by the Company. The selected unaudited combined historical
data have been derived from the separate audited financial statements of each of
the Cable Companies included elsewhere in this Prospectus. The following data
should be read in conjunction with the audited financial statements, related
notes thereto, management's discussion and analysis of the financial condition
and results of operations of the individual Cable Companies and the Unaudited
Pro Forma Combined Statement of Operations, in each case included elsewhere in
this Prospectus. See "Index to Financial Statements."

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PRO
---------------------------- FORMA
1993 1994 1995 1996 (2)
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues................................ $ 48,903 $ 50,191 $ 53,029 $ 55,343
Operating, selling, general and
administrative expenses (3)(4)........ 50,235 50,992 52,465 42,683
Operating income (loss) (3)(4).......... $ (1,332) $ (801) $ 564 $ 12,660

OTHER FINANCIAL DATA:

OTHER PERIOD-END OPERATING DATA: (6)

- ------------------------------

(1) The unaudited combined data set forth above have not been prepared in
accordance with GAAP, which do not allow for the combination of financial
data for entities that are not under common ownership. The Company believes
that such unaudited combined information is meaningful because: (i) the
Company's cable operations will constitute a separate industry segment
pursuant to Statement of Financial Accounting Standard No. 14, FINANCIAL
REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE, (ii) analysis of the
combined cable operations on a historical basis will serve as a bridge
between historical results and future disclosures which will be required of
the Company and (iii) the acquired cable operations will represent a
significant

29
<PAGE>
percentage of consolidated revenues and, more importantly, will contribute
approximately half of the Company's operating cash flow. The Company
believes that potential investors should understand the significance of the
cable operations to future operating results and would therefore benefit
from a presentation of cable operating data on a combined basis.

(2) Represents pro forma data for the Cable Companies as if they had been
combined at January 1, 1996. This column includes certain adjustments
primarily relating to intangible assets, depreciation, amortization,
interest expense and management fees. For more information regarding the pro
forma financial results and related adjustments, see the Unaudited Pro Forma
Combined Statement of Operations included elsewhere in this Prospectus.

(3) Includes management fees paid by the Cable Companies in the amounts of
$2,311,000, $2,475,000, $2,299,000 and $2,166,000 in 1993, 1994, 1995 and
1996, respectively, under management agreements in existence prior to the
Company's acquisition of the Cable Systems. These fees will not be relevant
to the Company's ongoing cable operating results. Under the Prime Management
Agreement, the Company will pay Prime Management a net annualized fee for
managing the Cable Systems in the amount of $1,000,000 for the year ending
October 31, 1997, $750,000 for the year ending October 31, 1998 and $500,000
for each year ending October 31 thereafter that the Prime Management
Agreement is in effect. See "Business-- Cable Television."

(4) Includes depreciation and amortization.

(5) Not applicable.

(6) All statistics are approximate.

30
<PAGE>
SELECTED CABLE COMPANY FINANCIAL DATA
(DOLLARS IN THOUSANDS)

The following tables set forth selected historical financial data separately
for the Cable Companies: (i) for, and as of the end of each of the years in the
five-year period ended December 31, 1995 and; (ii) for the six-month periods
ended June 30, 1995 and June 30, 1996. The data for the six-month periods ended
June 30, 1995 and June 30, 1996 have been derived from the unaudited financial
statements of the Cable Companies appearing elsewhere in this Prospectus. Such
unaudited financial statements, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair statement of the results for the unaudited periods. The following
information is qualified in its entirety by, and should be read in conjunction
with, the accompanying financial statements and notes thereto for the
corresponding Cable Company and the Company. See "Index to Financial
Statements."

PRIME CABLE OF ALASKA, L.P.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
----------- ----------- --------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues...................................... $ 25,951 $ 27,677 $ 29,101 $ 30,599 $ 32,594 $ 16,100 $ 17,276
Operating, selling, general and administrative
expenses (1)................................ 29,871 31,373 32,615 33,561 34,425 17,175 18,002
Operating income (loss) (1)................... $ (3,920) $ (3,696) $ (3,514) $ (2,962) $ (1,831) $ (1,075) $ (726)

OTHER OPERATING DATA:

Total assets (period-end)..................... $ 120,397 $ 111,179 $ 98,322 $ 85,303 $ 74,141 $ 80,061 $ 61,224
EBITDA (before management fees)............... $ 13,968 $ 14,699 $ 15,289 $ 15,653 $ 16,330 $ 7,950 $ 8,608
</TABLE>

ALASKAN CABLE COMPANIES (2)

Revenues...................................... $ 13,761 $ 13,914 $ 14,142 $ 13,883 $ 14,515 $ 7,224 $ 7,442
Operating, selling, general and administrative
expenses (3)................................ 13,221 14,013 13,775 13,367 13,883 6,858 7,113
Operating income (loss) (3)................... $ 540 $ (99) $ 367 $ 516 $ 632 $ 366 $ 329

OTHER OPERATING DATA:

Total assets (period-end)..................... $ 38,242 $ 35,167 $ 33,115 $ 33,380 $ 24,494 $ 24,106 $ 19,209
EBITDA (before management fees)............... $ 6,666 $ 6,208 $ 6,931 $ 6,841 $ 7,033 $ 3,513 $ 3,598
</TABLE>

ALASKA CABLEVISION, INC.

Revenues...................................... $ 5,488 $ 5,626 $ 5,660 $ 5,709 $ 5,920 $ 2,969 $ 3,007
Operating, selling, general and administrative
expenses (4)................................ 3,614 3,603 3,845 4,064 4,157 2,037 2,119
Operating income (loss) (4)................... $ 1,874 $ 2,023 $ 1,815 $ 1,645 $ 1,763 $ 932 $ 888

OTHER OPERATING DATA:

Total assets (period-end)..................... $ 2,212 $ 2,076 $ 2,211 $ 2,663 $ 3,306 $ 3,184 $ 3,446
EBITDA (before management fees)............... $ 2,847 $ 2,981 $ 2,817 $ 2,530 $ 2,583 $ 1,359 $ 1,309
</TABLE>

31
<PAGE>
(1) Includes management fees paid by Prime in the amounts of $1,542,000,
$1,671,000 and $1,674,000 in 1993, 1994 and 1995, respectively, and $817,000
and $924,000 for the six months ended June 30, 1995 and 1996, respectively,
under management agreements in existence prior to the Company's acquisition
of Prime. These fees will not be relevant to the Company's ongoing cable
operating results. See "Business--Cable Television."

(2) Combined for Alaskan Cable/Fairbanks, Alaskan Cable/Juneau, and Alaskan
Cable/Ketchikan-Sitka.

(3) Includes management fees paid by Alaskan Cable in the amounts of $202,000,
$233,000 and $225,000 in 1993, 1994 and 1995, respectively, and $113,000 and
$156,000 for the six months ended June 30, 1995 and 1996, respectively,
under management agreements in existence prior to the Company's acquisition
of cable systems from Alaskan Cable. These fees will not be relevant to the
Company's ongoing cable operating results. See "Business--Cable Television."

(4) Includes management fees paid by Alaska Cablevision in the amount of
$567,000, $517,000 and $400,000 in 1993, 1994 and 1995, respectively, and
$217,000 and $184,000 for the six months ended June 30, 1995 and 1996,
respectively, under management agreements in existence prior to the
Company's acquisition of cable systems from Alaska Cablevision. These fees
will not be relevant to the Company's ongoing cable operating results. See
"Business--Cable Television."

32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO AND THE OTHER
FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

The Company has historically reported revenues principally from the
provision of interstate and intrastate long distance telecommunications services
to residential, commercial and governmental customers and to other common
carriers (principally MCI and Sprint). These services accounted for
approximately 86.5% of the Company's telecommunications services revenues in
1996 and 92.6% of the Company's telecommunications services revenues during the
first quarter of 1997. The balance of telecommunications services revenues have
been attributable to corporate network management contracts, telecommunications
equipment sales and service and other miscellaneous revenues (including revenues
from prepaid and debit calling cards, the installation and leasing of customers'
VSAT equipment and fees charged to MCI and Sprint for certain billing services).
Factors that have the greatest impact on year-to-year changes in
telecommunications services revenues include the rate per minute charged to
customers and usage volumes, usually expressed as minutes of use. These factors
in turn depend in part upon economic conditions in Alaska. The economy of Alaska
is dependent upon the natural resource industries, in particular oil production,
as well as tourism, government and United States military spending. See
"Business--Alaskan Economy."

The Company's telecommunications cost of sales and services has consisted
principally of the direct costs of providing services, including local access
charges paid to LECs for the origination and termination of long distance calls
in Alaska, fees paid to other long distance carriers to carry calls that
terminate in areas not served by the Company's network (principally the lower 49
states, most of which calls are carried over MCI's network, and international
locations, which calls are carried principally over Sprint's network), and the
cost of equipment sold to the Company's customers. In 1996, local access charges
accounted for 49.8% of telecommunications cost of sales and services, fees paid
to other long distance carriers represented 34.7%, satellite transponder lease
and undersea fiber maintenance costs represented 9.1%, and telecommunications
equipment accounted for 5.2% of telecommunications cost of sales and services.
During the three months ended March 31, 1997, local access charges accounted for
45.7% of telecommunications cost of sales and services, fees paid to other long
distance carriers represented 32.1%, satellite transponder lease and undersea
fiber maintenance costs represented 9.4% and telecommunications equipment
accounted for 2.9% of telecommunications cost of sales and services.

The Company's selling, general, and administrative expenses have consisted
of operating and engineering, service, sales and marketing, general and
administrative, legal and regulatory expenses. Most of these expenses consist of
salaries, wages and benefits of personnel and certain other indirect costs (such
as rent, travel, utilities and certain equipment costs). A significant portion
of selling, general, and administrative expenses, 28.6% in 1996 and 17.9% during
the three months ended March 31, 1997, represents the cost of the Company's
advertising and promotion programs.

Following the acquisition of the Cable Systems effective October 31, 1996,
the Company now reports a significant level of revenues and EBITDA from the
provision of cable services. During the first quarter of 1997, cable revenues
and EBITDA represented 25.8% and 64.0%, respectively, of consolidated revenues
and EBITDA. On a pro forma basis, assuming the Cable Systems had been acquired
by the Company as of January 1, 1996, revenues and EBITDA from cable services
would have represented 26.3% and 55.7%, respectively, of the Company's
consolidated revenues and EBITDA for 1996.

33
<PAGE>
The Company expects to commence offering local exchange services initially
in Anchorage during the second half of 1997, and expects that local exchange
services will represent less than 2.0% of revenues in 1997 and less than 8.0% of
revenues in 1998. The Company expects that it may generate moderately negative
EBITDA from local exchange services during this time period.

The Company began developing plans for PCS wireless communications service
deployment in 1995 and is currently evaluating various technologies for a
proposed PCS network. The Company expects to launch PCS service in Anchorage as
early as 1999.

RESULTS OF OPERATIONS

The following table sets forth selected financial data of the Company as a
percentage of total revenues for the periods indicated and the percentage
changes in such data as compared to the corresponding prior year period:
<TABLE>
<CAPTION>
PERCENTAGE CHANGE
THREE MONTHS ENDED ----------------------
YEAR ENDED DECEMBER 31, MARCH 31, 1995 1996
---------------------------------- ---------------------- VS. VS.
1994 1995 1996 1996 1997 1994 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Telecommunications services... 100.0% 100.0% 94.2% 100.0% 74.2% 10.5% 20.2%
Cable services................ -- -- 5.8 -- 25.8 -- --
----- ----- ----- ----- ----- ----- ---
Total revenues.................. 100.0% 100.0% 100.0% 100.0% 100.0% 10.5% 27.5%
Cost of sales and services.... 54.6 55.8 56.2 56.1 51.4 12.9 28.5
Selling, general and
administrative expenses..... 28.6 29.2 28.1 28.5 30.8 12.6 23.1
Depreciation and
amortization................ 5.7 4.6 5.7 5.0 11.6 (9.7) 57.0
Operating income................ 11.1 10.4 10.0 10.4 6.2 3.9 21.5
Net earnings (loss) before
income taxes.................. 10.0 9.7 7.7 9.7 (1.2) 7.9 0.7
Net earnings (loss)............. 6.1% 5.8% 4.5% 5.6% (1.0%) 5.2% (0.5%)

OTHER OPERATING DATA:
Cable operating income (1)...... -- -- 23.2% -- 18.5% -- --
Cable EBITDA (1)(2)............. -- -- 48.4 -- 46.1 -- --
Consolidated EBITDA............. 16.8% 15.1% 15.7% 17.8% 18.3% (0.7)% 32.4%

THREE MONTHS
1997 VS.
THREE MONTHS
1996
----------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Telecommunications services... 3.3%
Cable services................ --
-----
Total revenues.................. 39.2%
Cost of sales and services.... 27.5
Selling, general and
administrative expenses..... 50.5
Depreciation and
amortization................ 224.3
Operating income................ (16.6%)
Net earnings (loss) before
income taxes.................. --
Net earnings (loss)............. --
OTHER OPERATING DATA:
Cable operating income (1)...... --
Cable EBITDA (1)(2)............. --
Consolidated EBITDA............. 61.3%
</TABLE>

- ------------------------------

(1) Computed as a percentage of total cable services revenues.

(2) Computed before deducting management fees. Under the Prime Management
Agreement, the Company will pay Prime Management a net annualized fee for
managing all of the Cable Systems in the amount of $1,000,000 for the year
ending October 31, 1997, $750,000 for the year ending October 31, 1998 and
$500,000 for each year ending October 31 thereafter that the Prime
Management Agreement is in effect. See "Business--Cable Television."

THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

REVENUES. Total revenues increased 39.2% from $38.0 million for the three
months ended March 31, 1996 to $52.9 million for the three months ended March
31, 1997. Long distance transmission revenues from commercial, residential,
governmental, and other common carrier customers increased 6.5% from $34.1
million for the three months ended March 31, 1996 to $36.3 million for the three
months ended March 31, 1997. This increase in revenues resulted in part from a
12% increase in minutes of interstate and international traffic carried, which
traffic totaled 149.3 million minutes, and a 9.4% increase in minutes of
intrastate traffic, which traffic totaled 31.5 million minutes during the
quarter. The increases in traffic resulted from growth in the underlying
economy, usage stimulation resulting from reductions in rates, an increase in
the number of presubscribed lines assigned to the Company, and an expansion of
the Company's service area resulting from the turn-up of a number of new
satellite earth station facilities

34
<PAGE>
located in rural Alaska. Revenue and minutes growth were also driven by an
increase in services provided to other common carriers (principally MCI and
Sprint), which other common carrier revenues increased from $10.7 million for
the three months ended March 31, 1996 to $13.4 million for the three months
ended March 31, 1997. System sales and network service revenues decreased 20.7%
from $2.9 million for the three months ended March 31, 1996 to $2.3 million for
the three months ended March 31, 1997, principally due to the temporary increase
in the level of activity in the prior year related to the provision of services
under a new outsourcing contract with National Bank of Alaska. Private line and
private network transmission revenues increased 5.9% from $3.4 million for the
three months ended March 31, 1996 to $3.6 million for the three months ended
March 31, 1997. The Company reported three months of cable services revenues in
1997 following its acquisition of the Cable Systems effective October 31, 1996.
The Company estimates that its facilities passed 162,711 homes in Alaska and
that it had approximately 104,400 basic subscribers (92,940 equivalent basic
subscribers) as of March 31, 1997. There was little change in the number of
subscribers, the rates charged those subscribers, or the number of homes passed
by the Cable Systems during the three-month period ended March 31, 1997.

The increases in telecommunication services revenues were offset in part by
a 6.0% reduction in the Company's average revenue per minute on long distance
traffic from $0.184 per minute for the three months ended March 31, 1996 to
$0.173 per minute for the three months ended March 31, 1997. The decrease in the
average revenue per minute resulted from the Company's promotion of, and
customers' greater than anticipated acceptance of new calling plans offering
discounted rates and length of service rebates.

COST OF SALES AND SERVICES. Cost of sales and services totaled $21.3
million for the three months ended March 31, 1996 and $27.2 million for the
three months ended March 31, 1997. Of this increase, $3.2 million resulted from
cable services programming and copyright charges incurred during the first
quarter of 1997. Long distance transmission services costs increased from $19.2
million for the three months ended March 31, 1996 to $21.7 million for the three
months ended March 31, 1997. The increase in transmissions costs was
approximately proportional to the increase in the number of minutes carried in
the first quarter of 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 50.9% from $10.8 million for the three months
ended March 31, 1996 to $16.3 million for the three months ended March 31, 1997,
and, as a percentage of revenues, increased from 28.5% for the three months
ended March 31, 1996 to 30.7% for the three months ended March 31, 1997.
Selling, general and administrative expenses increased as a result of increased
sales and customer service volumes and bad debt expense totaling $523,000 for
the three months ended March 31, 1997 compared to $397,000 for the three months
ended March 31, 1996 (directly associated with increased revenues), and was
offset by a reduction in sales, advertising and telemarketing costs which
totaled $3.1 million for the three months ended March 31, 1996 as compared to
$2.9 million for the three months ended March 31, 1997. Selling, general and
administrative expenses also increased for the three months ended March 31, 1997
due to increased costs totaling $1.1 million in sales, engineering, operations,
accounting, human resources, legal and regulatory, and management information
services. Such costs were associated with the development and introduction, or
planned introduction, of new products and services including local exchange
services, PCS services, and Internet services. Cable services selling, general
and administrative costs totaled $4.4 million during the quarter ended March 31,
1997.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $4.2 million from $1.9 million for the three months ended March 31,
1996 to $6.1 million for the three months ended March 31, 1997. Of this
increase, $3.5 million resulted from the Company's acquisition of the Cable
Systems effective October 31, 1996, with the balance of the increase
attributable to the Company's $38.0 million investment in facilities during
1996.

35
<PAGE>
INTEREST EXPENSE, NET. Interest expense, net of interest income, increased
from $260,000 for the three months ended March 31, 1996 to $3.9 million for the
three months ended March 31, 1997. This increase resulted primarily from
increases in the Company's average outstanding indebtedness incurred in
connection with its acquisition of the Cable Systems and investment in new
facilities during 1996, offset in part by increases in the amount of interest
capitalized during 1997.

INCOME TAX EXPENSE. Income tax expense decreased from $1.6 million for the
three months ended March 31, 1996 to a benefit of $132,000 for the three months
ended March 31, 1997 due to the Company incurring a net loss before income taxes
for the three months ended March 31, 1997 as compared to net earnings for the
three months ended March 31, 1996. The Company's effective income tax rate
decreased from 42.0% for the three months ended March 31, 1996 to 20.1% for the
three months ended March 31, 1997 due to the net loss and the proportional
amount of items that are nondeductible for tax purposes.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

REVENUES. Total revenues increased 27.5% from $129.3 million in 1995 to
$164.9 million in 1996. Long distance transmission revenues from commercial,
residential and governmental customers increased 18.8% from $120.0 million in
1995 to $142.6 million in 1996. This increase reflected a 22.6% increase in
interstate and international minutes of use to 570 million minutes and a 29.8%
increase in intrastate minutes of use to 121.2 million minutes, principally due
to a new marketing program which the Company launched during the third quarter
of 1995. This program consisted of the introduction of a new flat-rate calling
plan coupled with telemarketing, direct sales, and the promotion of a $1.0
million sweepstakes. Revenue growth in 1996 was also due to a 23.7% increase in
revenues from other common carriers (principally MCI and Sprint), from $38.8
million in 1995 to $48.0 million in 1996, and a 23.7% increase in private line
and private network transmission services revenues, from $11.4 million in 1995
to $14.1 million in 1996. Systems sales and services revenues also increased
44.4% from $7.2 million in 1995 to $10.4 million in 1996, primarily due to the
commencement in the first quarter of 1996 of services provided under a new
outsourcing contract with National Bank of Alaska. The Company also reported two
months' of cable services revenues in 1996 following its acquisition of the
Cable Systems effective October 31, 1996.

The above increases in revenues were offset in part by a 4.8% reduction in
the Company's average revenue per minute on long distance traffic from $0.188
per minute in 1995 to $0.179 per minute in 1996. The decrease in revenues
resulted from the Company's promotion of and customers' enrollment in new
calling plans offering discounted rates and length of service rebates.

COST OF SALES AND SERVICES. Cost of sales and services was $72.1 million in
1995 and $92.7 million in 1996. As a percentage of total revenues, cost of sales
and services increased from 55.8% in 1995 to 56.2% in 1996. The increase in cost
of sales and services as a percentage of revenues during 1996 as compared to
1995 resulted primarily from the reduced average revenue per minute billed to
customers in 1996 as compared to 1995 without an offsetting reduction in the
revenue per minute billed to the Company for the local access and interstate
termination services it obtains from third parties. These increases were offset
in part by refunds in the first two quarters of 1996 aggregating approximately
$960,000 from a LEC and the National Exchange Carriers Association in respect of
earnings by them which exceeded regulatory requirements.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 23.1% from $37.7 million in 1995 to $46.4
million in 1996. As a percentage of total revenues, selling, general and
administrative expenses decreased from 29.2% in 1995 to 28.1% in 1996. Selling,
general and administrative expenses increased as a result of increased sales and
customer service volumes, additional bad debt expense totaling $1.7 million in
1996 compared to $1.5 million in 1995 (directly associated with increased
revenues), and increased sales, advertising and telemarketing costs

36
<PAGE>
totaling $13.3 million in 1996 compared to $9.9 million in 1995, due to the
introduction of various marketing plans and other proprietary rate plans.
Additionally, selling, general and administrative expenses increased in 1996 due
to an increase of approximately $2.7 million in sales, engineering, operations,
accounting, human resources, legal and regulatory, and management information
services expenses. Such costs were associated with the development and
introduction, or planned introduction, of new products and services including
local services, cable television services, rural message and data telephone
services, PCS services, and Internet services.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 56.7% from $6.0 million in 1995 to $9.4 million in 1996. This increase
resulted primarily from the Company's acquisition of the Cable Systems effective
October 31, 1996.

INTEREST EXPENSE, NET. Interest expense, net of interest income, increased
309.7% from $903,000 in 1995 to $3.7 million in 1996. This increase resulted
primarily from increases in the Company's average outstanding indebtedness
resulting primarily from its acquisition of the Cable Systems and construction
of new facilities in rural Alaska, offset in part by increases in the amount of
interest capitalized during 1996.

INCOME TAX EXPENSE. Income tax expense increased 2.0% from $5.1 million in
1995 to $5.2 million in 1996 due to an increase in net earnings before income
taxes and a slightly higher effective income tax rate from 40.5% in 1995 to
41.2% in 1996.

As a result of its acquisition of the Cable Systems, the Company acquired
net operating loss carryforwards ("NOL carryforwards") for income tax purposes
totaling $58.5 million which begin to expire in 2004 if not utilized. However,
the Company's utilization of these NOL carryforwards is subject to certain
limitations pursuant to Section 382 of the Internal Revenue Code. Because of the
limitation on the NOL carryforwards, the Company established an $8.1 million
valuation allowance to offset the gross amount of the deferred tax asset. The
amount of the valuation allowance was based on an estimate of the amount of the
NOL carryforwards that will not be utilized, and the effective income tax rate.
The amount of deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforwards period are reduced.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

REVENUES. Total revenues increased 10.5% from $117.0 million in 1994 to
$129.3 million in 1995. Revenue growth was primarily attributable to increases
in minutes of use and the average revenue per minute for long distance traffic.
The Company's average revenue per minute increased 1.1% from $0.186 in 1994 to
$0.188 in 1995. Interstate minutes of use increased 12.7% to 464.5 million
minutes and intrastate minutes of use increased 17.3% to 93.4 million minutes.
Revenue growth was also attributable to a 21.6% increase in revenues derived
from other common carriers (principally MCI and Sprint), from $31.9 million in
1994 to $38.8 million in 1995, and a 7.6% increase in private line and private
network transmission services revenues, from $10.6 million in 1994 to $11.4
million in 1995.

These increases in revenues were partially offset by a 20.9% decline in
system sales and services revenues from $9.1 million in 1994 to $7.2 million in
1995. This decline was due to fewer large-dollar equipment sales orders received
during 1995 as well as a temporary reduction in the level of the Company's
outsourcing services provided to the oil field services industry.

COST OF SALES AND SERVICES. Cost of sales and services was $63.9 million in
1994 and $72.1 million in 1995. Cost of sales and services as a percentage of
total revenues increased from 54.6% of revenues in 1994 to 55.8% in 1995. The
increase in cost of sales and services as a percentage of revenues resulted
primarily from increases in costs associated with the Company's lease of
transponder capacity. The two wideband transponders the Company owned reached
the end of their expected useful life in August 1994, at which time the Company
leased replacement capacity. The cost of the leased capacity

37
<PAGE>
contributed to an increase in distribution costs during 1995 as compared to
1994. During 1995 the Company incurred approximately $450,000 for nonrecurring
costs related to breaks in the undersea fiber optic cable and costs associated
with its new DAMA technology. The Company also experienced reduced margins
associated with equipment sales and service contracts.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 12.5% from $33.5 million in 1994 to $37.7
million in 1995. As a percentage of total revenues, selling, general and
administrative expenses increased from 28.6% in 1994 to 29.2% in 1995. Increases
in selling, general and administrative expenses for the period were primarily
due to increased personnel necessary to support the Company's expansion efforts
and the increase in minutes of traffic carried. Additional costs were incurred
during the fourth quarter of 1995 attributable to the promotion of the Company's
calling plans.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased 9.1% from $6.6 million in 1994 to $6.0 million in 1995. The decrease
was attributable primarily to the Company's retirement of two owned wideband
transponders in August 1994 that were replaced with leased rather than owned
capacity.

INTEREST EXPENSE, NET. Interest expense, net of interest income, decreased
30.5% from $1.3 million in 1994 to $903,000 in 1995. This decrease resulted
primarily from a reduction in the Company's average outstanding indebtedness.

INCOME TAX EXPENSE. Income tax expense increased 13.3% from $4.5 million in
1994 to $5.1 million in 1995 due to an increase in net earnings before income
taxes and a higher effective income tax rate from 38.9% in 1994 to 40.5% in
1995.

38
<PAGE>
SEASONALITY; FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS

The following chart provides selected unaudited statement of operations data
from the Company's quarterly results of operations during 1995 and 1996 and for
the three months ended March 31, 1997:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER TOTAL YEAR
- ------------------------------------------------------ --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenues
Telecommunications services......................... $ 29,693 $ 31,860 $ 33,363 $ 34,363 $ 129,279
Cable services...................................... -- -- -- -- --
--------- --------- --------- --------- -----------
Total revenues........................................ 29,693 31,860 33,363 34,363 129,279
Operating income...................................... 2,958 3,337 4,108 3,101 13,504
Net earnings.......................................... 1,607 1,836 2,252 1,807 7,502
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Net earnings per share................................ $ 0.07 $ 0.08 $ 0.09 $ 0.07 $ 0.31
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Consolidated EBITDA................................... $ 4,538 $ 4,897 $ 5,716 $ 4,346 $ 19,497

FIRST SECOND THIRD FOURTH
1996 QUARTER QUARTER QUARTER QUARTER TOTAL YEAR
- ------------------------------------------------------ --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenues
Telecommunications services......................... $ 37,969 $ 37,199 $ 38,664 $ 41,587 $ 155,419
Cable services...................................... -- -- -- 9,475 9,475
--------- --------- --------- --------- -----------
Total revenues........................................ 37,969 37,199 38,664 51,062 164,894
Operating income...................................... 3,947 3,970 4,017 4,475 16,409
Net earnings.......................................... 2,137 2,150 2,140 1,035 7,462
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Net earnings per share................................ $ 0.09 $ 0.09 $ 0.09 $ 0.02 $ 0.27
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Cable EBITDA.......................................... $ -- $ -- $ -- $ 4,416 $ 4,416
Consolidated EBITDA................................... $ 5,834 $ 5,888 $ 5,829 $ 8,267 $ 25,818
<CAPTION>

FIRST
1997 QUARTER
- ------------------------------------------------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues
Telecommunications services......................... $ 39,225
Cable services...................................... 13,656
---------
Total revenues........................................ 52,881
Operating income...................................... 3,292
Net earnings (loss)................................... (525)
---------
---------
Net earnings (loss) per share......................... $ (0.01)
---------
---------
Cable EBITDA.......................................... $ 6,025
Consolidated EBITDA................................... $ 9,412
</TABLE>

Total revenues in the quarter ended March 31, 1997 were $52.9 million,
representing a 3.6% increase over total revenues in the fourth quarter of 1996
of $51.1 million. This increase in revenues resulted in part from an increase in
cable services revenues to $13.7 million in the first quarter of 1997 from $9.5
million in the fourth quarter of 1996 because the Company reported three months
of cable services revenues in the first quarter of 1997 and only two months of
such revenues during the fourth quarter of 1996. This revenue increase was
partially offset by a 5.7% decrease in telecommunications services revenues to
$39.2 million in the first quarter of 1997 from $41.6 million during the fourth
quarter of 1996. This decrease is attributable in part to a reduction in the
average revenues per minute reported

39
<PAGE>
by the Company, which resulted from the Company's promotion of, and customers'
greater than anticipated acceptance of, new calling plans offering discounted
rates and length of service rebates.

Operating expenses increased during the first quarter of 1997 as compared to
the fourth quarter of 1996 principally as a result of (i) turn-up costs,
including rent and utilities, of the Company's new DAMA satellite earth-station
facilities, (ii) personnel, sales, engineering, operations, accounting, human
resources, legal and regulatory expenses associated with the development and
introduction, or planned introduction, of new products and services including
local services, PCS services and Internet services and (iii) increases in cable
programming costs and copyright charges effective January 1, 1997.

The Company expects that its EBITDA and EBITDA margins during 1997 may
improve due to (i) increasing average long-distance revenues per minute, (ii)
cable service rate increases beginning in April 1997 and (iii) revenue
generation from the Company's rural telephony expansion and new service and
product offerings to offset expenses already generated by these endeavors.

The Company reported a net loss of $0.5 million in the first quarter of 1997
as compared to net earnings of $1.0 million during the fourth quarter of 1996.
In addition to the margin compression experienced by the Company in the first
quarter of 1997 discussed above, the net loss was attributable to higher
depreciation and amortization and interest expenses associated with reporting a
full three months of cable services operations in the first quarter of 1997 and
only two months of such costs in the fourth quarter of 1996.

Long distance revenues have historically been highest in the summer months
as a result of temporary population increases attributable to tourism and
increased seasonal economic activity such as construction, commercial fishing,
and oil and gas activities. Cable television revenues, on the other hand, are
higher in the winter months because consumers tend to watch more television, and
spend more time at home, during these months. The Company's ability to implement
construction projects is also reduced during the winter months because of cold
temperatures, snow and short daylight hours.

LIQUIDITY AND CAPITAL RESOURCES

The Company reported cash flows from operating activities during the three
months ended March 31, 1997 of $1.8 million, net of changes in the components of
working capital. Additional sources of cash during the three months ended March
31, 1997 included long-term borrowings of $10.0 million. The Company's
expenditures for property and equipment, including construction in progress,
totaled $7.0 million and $9.5 million during the three months ended March 31,
1996 and 1997, respectively. Uses of cash during the first quarter of 1997
included repayment of $10.4 million of long-term borrowings and capital lease
obligations and an increase in notes receivable of $330,000.

The Company reported cash flows from operating activities in 1996 of $22.4
million, net of changes in the components of working capital. Additional sources
of cash in 1996 included long-term borrowings of $208.0 million, sales of
additional Common Stock to MCI of $13.0 million, and payments on notes
receivable of $288,000. The Company's uses of cash included payment of the cash
portion of the consideration for the acquisition of the Cable Systems. The total
purchase price for the acquisition of the Cable Systems was $280.1 million and
was financed by the Company through the issuance to the sellers of the Cable
Systems of approximately 14.7 million shares of Class A Common Stock (valued at
$86.7 million), the payment of $78.2 million in cash, the assumption of
approximately $110.6 million in existing indebtedness, and the issuance to one
seller of $10.0 million in subordinated convertible notes. The notes were
converted into approximately 1.5 million shares of Class A Common Stock in
January 1997. Other uses of cash during 1996 included payment of a $9.1 million
transponder purchase deposit, repayment of $5.0 million of long-term borrowings
and capital lease obligations, purchase of $621,000 of Common Stock held by an
officer, which stock is held in treasury to satisfy a deferred compensation
obligation in lieu of satisfying the obligation in cash, payment of loan fees
totaling $764,000, and investment in other assets.

40
<PAGE>
The Company's expenditures for property and equipment, including
construction in progress, totaled $38.6 million and $8.9 million during 1996 and
1995, respectively. The Company anticipates that its capital expenditures in
1997 will be between $60 million and $65 million. Planned capital expenditures
over the next five years include $245.0 million to $265.0 million to fund
expansion of long distance facilities (including approximately $40.0 million for
satellite transponders and approximately $130.0 million for new undersea fiber
optic cable facilities which will be financed by GCI Transport Company); between
$140.0 million and $160.0 million to fund development, construction and
operating costs of its local exchange and PCS networks and businesses; and
between $65.0 million and $85.0 million to upgrade its cable television plant
and to purchase equipment for new cable television services. Sources of funds
for these planned capital expenditures include net proceeds of the Offerings,
internally generated cash flows and borrowings under the Company's Credit
Facility and its separate committed financing for GCI Transport Company all of
which funds will be necessary to complete the Company's planned capital
expenditures. Consummation of one Offering is not contingent upon consummation
of the other Offering and there can be no assurance that the Stock Offering will
be consummated. Without the proceeds from the Stock Offering, the Company may
have to seek alternative financing for a portion of its business plan. In
particular, if the Stock Offering is not consummated, the Company may need to
obtain additional financing for its planned purchase of seven transponders on
the Galaxy X satellite that is expected to be launched in mid-1998. See "Risk
Factors--Significant Capital Requirements; Concurrent Offerings; Refinancing of
Existing Credit Facilities," "Use of Proceeds" and "Business--Business
Strategy," and "Description of Credit Facility."

Net receivables increased $7.1 million from December 31, 1995 to December
31, 1996 and $5.0 million from March 31, 1996 to March 31, 1997 resulting from:
(i) increased MTS revenues in 1996 as compared to 1995 and in 1997 as compared
to 1996; (ii) increased amounts due from other common carriers attributed to
growth in their traffic carried by the Company; (iii) increased private line
sales activity in 1996 as compared to 1995 and in 1997 as compared to 1996; and
(iv) increases in receivables resulting from the Cable Systems acquisition.

The Company reported a working capital deficit of $27.3 million as of March
31, 1997. During April 1997 the Company extended the maturity of its Telephony
Credit Facility from April 1997 to July 1997. Since the entire facility matures
within the twelve-month period ending March 31, 1998, the outstanding balance as
of March 31, 1997 was included in current maturities of long-term debt. Except
for the classification of the Company's senior indebtedness as current, working
capital at March 31, 1997 totaled $4.6 million, a $4.6 million decrease from
working capital similarly recomputed at December 31, 1996.

INFLATION

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

SUPPLEMENTAL DISCUSSION OF HISTORICAL OPERATING RESULTS OF THE CABLE SYSTEMS

OVERVIEW

The Cable Systems were acquired effective October 31, 1996. The Cable
Systems serve 21 communities and areas in Alaska, including the state's three
largest population centers, Anchorage, Fairbanks and Juneau. As of March 31,
1997, the Cable Systems passed 162,711 homes or approximately 70% of all
households in Alaska and served approximately 104,400 subscribers (92,940
equivalent basic subscribers), representing 64% of households passed by the
Cable Systems.

The Company generates cable services revenues from three primary sources:
(i) programming services, including monthly basic or premium subscriptions and
pay-per-view movies or other one-time events, such as sporting events; (ii)
equipment rentals or installation; and (iii) advertising sales. In 1996,

41
<PAGE>
on a historical combined basis, programming services generated 86.0% of total
cable services revenues, equipment rental or installation accounted for 8.0% of
revenues, advertising sales accounted for 4.0% of such revenues, and other
services accounted for the remaining 2.0% of total cable services revenues. The
primary factors that contribute to year-to-year changes in cable services
revenues are average monthly subscription and pay-per-view rates, the mix among
basic, premium and pay-per-view services, and the average number of subscribers
during a given reporting period.

The Cable Systems' operating, selling, general and administrative expenses
have consisted principally of programming and copyright expenses, labor,
maintenance and repairs, marketing and advertising, rental expense, property
taxes and depreciation and amortization. In 1996, on an historical combined
basis, programming and copyright expenses represented approximately 25.8% of
total operating, selling and general administrative expenses. Marketing and
advertising expenses represented 2.2% of such total expenses and depreciation
and amortization represented 41.8% of such expenses.

Management fees paid by the Cable Systems in the amount of $2,475,000,
$2,229,000, and $2,166,000 in 1994, 1995 and 1996 (on an historical combined
basis), respectively, under management agreements in existence prior to the
Company's acquisition of the Cable Systems will not be relevant to the Company's
ongoing cable operating results. The Company has entered into a new management
agreement with Prime Management, pursuant to which Prime Management will oversee
all of the Company's cable operations. In exchange, the Company will pay Prime
Management a net annualized fee for managing the Cable Systems in the amount of
$1,000,000 for the year ending October 31, 1997, $750,000 for the year ending
October 31, 1998, and $500,000 for each year ending October 31 thereafter that
the Prime Management Agreement is in effect. Either party may terminate the
management agreement after October 31, 1998.

Due to the adjustment in the carrying value of the tangible and intangible
assets and a change in the tangible and intangible depreciation and amortization
lives of those assets following the Company's acquisition of the Cable Systems,
historical depreciation and amortization will not be directly comparable to
depreciation and amortization for the Cable Systems in the future. Depreciation
and amortization expense attributable to the Cable Systems was $22.0 million on
a combined historical basis for the year ended December 31, 1996, as compared to
$13.3 million on a pro forma basis as if the acquisition of the Cable Systems
had occurred January 1, 1996. Although the carrying value of the assets
increased, depreciation and amortization decreased due to the longer
depreciation and amortization lives.

RESULTS OF OPERATIONS--PRIME

The following table sets forth certain financial data of Prime expressed as
a percentage of revenues for the periods indicated and the percentage changes in
such data as compared to the corresponding prior year period:

<TABLE>
<CAPTION>
PERCENTAGE CHANGE
SIX MONTHS ------------------------
YEARS ENDED DECEMBER 31, ENDED SIX MOS.
JUNE 30, 1994 1995 1996 VS.
------------------------ --------------- VS. VS. SIX MOS.
1993 1994 1995 1995 1996 1993 1994 1995
------ ------ ------ ------ ------ ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ 100.0% 100.0% 100.0% 100.0% 100.0% 5.1% 6.5% 7.3%
Operating, selling, general and
administrative expenses (1)........... 112.1 109.7 105.6 106.7 104.2 2.9 2.6 4.8
Operating income (loss) (1)............. (12.1) (9.7) (5.6) (6.7) (4.2) 15.7 38.2 32.5
EBITDA (before management fees)......... 52.5% 51.2% 50.1% 49.4% 49.8% 2.3% 4.3% 8.3%
</TABLE>

- ------------------------------

(1) Includes management fees paid by Prime in the amounts of $1,542,000,
$1,671,000, and $1,674,000 in 1993, 1994 and 1995, respectively, and
$817,000 and $924,000 for the six months ended June 30, 1995 and 1996,
respectively, under management agreements in existence prior to the
Company's acquisition of cable systems from Prime. These fees will not be
relevant to the Company's ongoing cable operating results. Also includes
depreciation and amortization.

42
<PAGE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

The Cable Systems owned by Prime served subscribers in Anchorage and
surrounding areas (including Eagle River, Chugiak, Fort Richardson and Elmendorf
Air Force Base), in the Kenai and Soldotna area and in Bethel, Alaska. As of
June 30, 1996, the Prime cable systems passed more than 107,000 homes and served
more than 52,000 residential subscribers and 12,000 non-standard residential and
business connections, including individual dwelling units in apartment complexes
and hotels which are billed under bulk billing arrangements. Prime had
approximately 51,000 subscriptions to premium service units.

REVENUES. Revenues totaled $17.3 million for the six months ended June 30,
1996 and $16.1 million for the six months ended June 30, 1995. The 7.3% increase
resulted primarily from subscriber growth as a result of additional homes passed
and a rate increase implemented effective December 15, 1995. Average revenue per
account per month was approximately $42.17 for the six-month period ended June
30, 1996 and $40.67 for the six month period ended June 30, 1995. This
represents an increase of approximately 3.7% for the six months ended June 30,
1996 compared to the corresponding period of 1995.

THREE YEARS ENDED DECEMBER 31, 1995

As of December 31, 1995, the Prime cable systems passed more than 106,000
homes and served more than 53,000 residential subscribers and 12,000
non-standard residential and business connections, including individual dwelling
units in apartment complexes and hotels which are billed under bulk billing
arrangements. Prime had approximately 63,000 subscriptions to premium service
units.

REVENUES. Revenues totaled $32.6 million, $30.6 million and $29.1 million
during the years ended December 31, 1995, 1994 and 1993, respectively. The 6.5%
increase in 1995 as compared to 1994 and the 5.2% increase in 1994 as compared
to 1993 resulted primarily from subscriber growth due to an increase in the
number of homes passed. Approximately $356,000 of the growth in 1995 revenues
was due to increases in regulated service rates implemented in January 1995. No
rate increases were implemented during 1994. Average monthly revenue per account
was approximately $40.17, $39.92 and $40.75 in 1995, 1994 and 1993,
respectively, representing an increase (decrease) of approximately 0.6% and
(2.0%) in 1995 and 1994, respectively.

43
<PAGE>
RESULTS OF OPERATIONS - ALASKAN CABLE

The following table sets forth certain financial data of Alaskan Cable
expressed as a percentage of revenues for the periods indicated and the
percentage changes in such data as compared to the corresponding prior year
period:

<TABLE>
<CAPTION>
SIX MONTHS PERCENTAGE CHANGE
YEAR ENDED ENDED ----------------------------
DECEMBER 31, JUNE 30, 1994 1995 SIX MOS. 1996
------------------- ------------ VS. VS. VS.
1993 1994 1995 1995 1996 1993 1994 SIX MOS. 1995
----- ----- ----- ----- ----- ------ ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ 100.0% 100.0% 100.0% 100.0% 100.0% (1.8)% 4.6% 3.0%
Operating, selling, general and
administrative expenses (1)........... 97.4 96.3 95.6 94.9 95.6 (3.0) 3.9 3.7
Operating income (1).................... 2.6 3.7 4.4 5.1 4.4 (40.6) 22.5 (10.1)
EBITDA (before management fees)......... 49.0% 49.3% 48.5% 48.6% 48.4% (1.3)% 2.8% 2.4%
</TABLE>

- ------------------------------

(1) Includes management fees paid by Alaskan Cable in the amounts of $202,000,
$233,000 and $225,000 in 1993, 1994 and 1995, respectively, and $113,000 and
$156,000 for the six months ended June 30, 1995 and 1996, respectively,
under management agreements in existence prior to the Company's acquisition
of cable systems from Alaskan Cable. These fees will not be relevant to the
Company's ongoing cable operating results. Also includes depreciation and
amortization.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

The Cable Systems owned by Alaskan Cable served subscribers in the Fairbanks
area, including Fort Wainwright and Eielson Air Force Base and in Juneau,
Ketchikan and Sitka. As of June 30, 1996, the Alaskan Cable cable systems
(combined for all three corporations comprising Alaskan Cable throughout this
Alaskan Cable discussion) passed more than 42,720 homes and served more than
25,426 residential subscribers. Alaskan Cable had approximately 20,310
subscriptions to premium service units.

REVENUES. Revenues totaled $7.4 million and $7.2 million during the
six-month periods ended June 30, 1996 and 1995, respectively. The revenue growth
in 1996 as compared to 1995 resulted primarily from rate increases for services.
Average monthly revenue per account for the six month periods ended June 30,
1996 and June 30, 1995 was approximately $48.83 and $46.17, respectively,
representing an increase of 5.8%.

OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Operating,
selling, general and administrative expenses (excluding depreciation and
amortization), representing costs directly attributable to providing cable
services to customers, increased 4.7% for the six-month period ended June 30,
1996 compared to the corresponding period of 1995, primarily as a result of
increased business activity from additional services and higher programming
costs. Selling, general and administrative expenses increased 4.5% for the
six-month period ended June 30, 1996 compared to the corresponding period of
1995, primarily as a result of increased business activity from additional
services. Depreciation and amortization expense totaled $3.1 million and $3.0
million for the six-month periods ended June 30, 1996 and 1995, respectively.
The increase is primarily the result of the amortization of deferred loan
expenses pertaining to the line of credit reported in the first six months of
1996.

THREE YEARS ENDED DECEMBER 31, 1995

As of December 31, 1995, Alaskan Cable's cable systems passed more than
42,300 homes and served more than 25,900 residential subscribers. Alaskan Cable
had approximately 15,780 subscriptions to premium service units.

REVENUES. Revenues totaled $14.5 million, $13.9 million and $14.1 million
during the years ended December 31, 1995, 1994 and 1993, respectively. The 4.6%
growth in 1995 as compared to 1994 resulted primarily from increases in
regulated service rates implemented January 1, 1995. The 1.8%

44
<PAGE>
decrease in 1994 as compared to 1993 resulted primarily from subscriber rate
reductions implemented September 1, 1993. Average monthly revenue per account
was approximately $48.00, $45.75 and $47.75 in 1995, 1994 and 1993,
respectively, representing an increase (decrease) of approximately 4.9% and
(4.2%), respectively.

OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Operating,
selling, general and administrative expenses (excluding depreciation and
amortization), representing costs directly attributable to providing cable
services to customers increased 5.3% in 1995 as compared to 1994 and increased
2.7% in 1994 as compared to 1993, primarily as a result of subscriber growth and
higher programming costs. Depreciation and amortization expense was $6.2
million, $6.1 million and $6.4 million for the years ended December 31, 1995,
1994 and 1993, respectively. The 1995 increase as compared to 1994 resulted from
continued cable television build-out expenditures, and the amortization of line
of credit deferred loan expenses. The 1994 decrease as compared to 1993 resulted
from disposal of old cable television systems in 1993 whose original
construction costs were higher than the expenditures made to rebuild the system.

RESULTS OF OPERATIONS - ALASKA CABLEVISION

The following table sets forth certain financial data of Alaska Cablevision
expressed as a percentage of revenues for the periods indicated and the
percentage changes in such data as compared to the corresponding prior year
period:

<TABLE>
<CAPTION>
SIX MONTHS PERCENTAGE CHANGE
YEAR ENDED ENDED -----------------------------
DECEMBER 31, JUNE 30, 1994 1995 SIX MOS. 1996
------------------- ------------ VS. VS. VS.
1993 1994 1995 1995 1996 1993 1994 SIX MOS. 1995
----- ----- ----- ----- ----- ------ ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ 100.0% 100.0% 100.0% 100.0% 100.0% 0.1% 3.7% 1.3%
Operating, selling, general and
administrative expenses (1)........... 67.9 71.2 70.2 68.6 70.5 5.7 2.3 4.0
Operating inome (1)..................... 32.1 28.8 29.8 31.4 29.5 (9.4) 7.2 (4.7)
EBITDA (before management fees)......... 49.8% 44.3% 43.6% 45.8% 42.1% (10.2)% 2.1% (6.8)%
</TABLE>

- ------------------------------

(1) Includes management fees paid by Alaska Cablevision in the amounts of
$567,000, $517,000, and $400,000 in 1993, 1994 and 1995, respectively, and
$217,000 and $184,000 for the six months ended June 30, 1995 and 1996,
respectively, under management agreements in existence prior to the
Company's acquisition of cable systems from Alaska Cablevision. These fees
will not be relevant to the Company's ongoing cable operating results. Also
includes depreciation and amortization.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

The Cable Systems owned by Alaska Cablevision served subscribers in Kodiak,
Valdez, Cordova, Petersburg, Wrangell, Kotzebue and Nome. As of June 30, 1996,
Alaska Cablevision's cable systems passed more than 11,000 homes and served more
than 7,500 residential subscribers and over 1,500 business subscribers. Alaska
Cablevision had approximately 7,650 residential subscriptions to premium service
units.

REVENUES. Revenues totaled $3.0 million during each of the six-month
periods ended June 30, 1996 and 1995. Average monthly revenue per account was
approximately $62.00 and $61.17 during the six-month periods ended June 30, 1996
and 1995, respectively, representing an increase of approximately 1.4%.

45
<PAGE>
period of 1995 due to increases in the number of subscribers, program offerings
and programming rates. Depreciation and amortization expense was approximately
$237,000 and $210,000 for the six-month periods ended June 30, 1996 and 1995,
respectively. The increase in the six-month period ended June 30, 1996 as
compared to the same period of 1995 resulted from additional depreciation on
capital expenditures made during 1996 and a full year of depreciation in 1996 on
1995 capital expenditures as compared to a partial year of depreciation in 1995.

THREE YEARS ENDED DECEMBER 31, 1995

As of December 31, 1995, Alaska Cablevision's cable systems passed more than
10,860 homes and served more than 7,735 residential subscribers and over 100
business subscribers. Alaska Cablevision had approximately 7,875 residential
subscriptions to premium service units.

REVENUES. Revenues totaled $5.9 million, $5.7 million and $5.7 million
during the years ended December 31, 1995, 1994 and 1993, respectively. The 3.7%
increase in 1995 as compared to 1994 resulted primarily from modest growth in
the number of subscribers and increases in regulated service rates.
Approximately $171,000 of the growth in 1995 revenues was due to increases in
regulated service rates implemented November 1, 1994 and November 1, 1995. The
0.9% increase in 1994 as compared to 1993 resulted primarily from a 4.6%
increase in the number of subscribers offset by the subscriber rate reductions
implemented in September 1993 and July 1994. Average annual revenue per account
per month was approximately $60.83, $61.17 and $64.75 in 1995, 1994 and 1993,
respectively, representing decreases of approximately 0.6% and 5.5%,
respectively.

OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Operating,
selling, general and administrative expenses (excluding depreciation and
amortization), representing costs directly attributable to providing cable
services to customers, increased 2.3% in 1995 as compared to 1994 and increased
5.7% in 1994 as compared to 1993. Programming and copyright costs directly
attributable to providing cable services to customers increased 4.6% in 1995 as
compared to 1994 and increased 11.5% in 1994 as compared to 1993. The increases
resulted primarily from subscriber growth, increased program offerings and
higher programming rates. Depreciation and amortization expense was $420,000,
$314,000 and $435,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. The 1995 increase as compared to 1994 resulted from additional
depreciation on increased capital expenditures in 1995 as compared to 1994. The
1994 decrease as compared to 1993 resulted from certain tangible and intangible
assets becoming fully amortized.

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BUSINESS

OVERVIEW

The Company is a diversified telecommunications provider with a leading
position in facilities-based long distance service in the State of Alaska and,
as a result of recent acquisitions, has become Alaska's leading cable television
service provider. The Company seeks to become the first significant provider in
Alaska of an integrated package of telecommunications and cable television
services. Complementing its long distance, cable and cellular resale operations,
the Company has announced plans to provide facilities-based competitive local
exchange and wireless communications services in Alaska's major population
centers. The Company expects to launch local exchange services in Anchorage in
the second half of 1997. The Company also acquired a state-wide 30 MHz B-block
PCS license in June 1995 for approximately $1.65 million (or about $3.00 per
pop) and is currently evaluating various technologies for a proposed wireless
PCS network.

The Company believes that the size and growth potential of the voice, video
and data markets, the increasing deregulation of telecommunications services,
and the increased convergence of telephony, wireless and cable services offer
the Company considerable opportunities to integrate its telecommunications and
cable services and expand into communications markets both within and, over the
longer-term, outside of Alaska. The Company expects the rate of growth in
industry-wide telecommunications revenues to increase as the historical
dominance of monopoly providers is challenged as a result of deregulation.
Considerable deregulation has already taken place in the United States as a
result of the 1996 Telecom Act, with the barriers to competition between
telecommunications, local exchange and cable providers being lowered. The
Company believes that its acquisition of the Cable Systems and its development
of local exchange service and PCS leave it well-positioned to take advantage of
this deregulation process in telecommunications markets.

The Company began providing interstate long distance service in 1982 and
began providing intrastate long distance service in 1991. The Company provides a
full range of long distance services, including direct dial, 800, message toll,
private line, private network, operator and calling and debit card services, to
residential, commercial and governmental customers and to other common carriers.
In addition, the Company sells data communication equipment and offers technical
services.

The Company operates a state-of-the-art, competitive telecommunications
network employing the latest digital transmission technology based upon fiber
optic and digital microwave facilities within and between Anchorage, Fairbanks
and Juneau, a digital fiber optic cable linking Alaska to the contiguous 48
states and providing access to other carriers' networks for communication around
the world, and the use of satellite transmission to remote areas of Alaska (and
for certain interstate traffic as well). As of March 31, 1997, the Company's
long distance services were available, through the Company's network, to
approximately 90% of total Alaskan access lines. As of March 31, 1997, the
Company's residential customers were served by approximately 81,150 access
lines, representing approximately 41% of all Alaskan residential presubscribed
access lines. In addition, the Company had over 11,000 commercial, governmental
and other common carrier customers who were served by approximately 57,600
access lines, representing approximately 48% of all presubscribed
non-residential access lines in the State.

Effective October 31, 1996, the Company became the leading cable television
services provider in Alaska upon its acquisition of the Cable Systems from
several unrelated sellers for total consideration of approximately $280.1
million. The Cable Systems serve 21 communities and areas in Alaska, including
the state's three largest urban areas, Anchorage, Fairbanks and Juneau. As of
March 31, 1997, the Cable Systems passed 162,711 homes or approximately 70% of
all households in Alaska and served approximately 104,400 subscribers (92,940
equivalent basis subscribers), representing 64% of households passed by the
Cable Systems. As of March 31, 1997, the Cable Systems consisted of
approximately 1,765 miles of installed cable plant having between 300 and 450
MHz of channel capacity.

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BUSINESS STRATEGY

The Company's goal is to become the first significant provider of integrated
voice, video and data services in Alaska while maximizing growth in its revenues
and net income. The Company's strategies to achieve this objective fall
generally into four broad categories: (i) integrate the Company's
telecommunications and cable operations, (ii) expand the scope of the Alaskan
voice, video and data markets that the Company will address, (iii) increase the
Company's penetration of these markets, and (iv) improve the Company's
consolidated operating margins and utilization of the Company's capital
resources. These broad strategies are discussed below. The Company's strategic
focus over the next several years will be on Alaska. On a longer-term basis, the
Company may consider growth opportunities outside Alaska, especially in areas of
the world with demographics and infrastructure characteristics similar to those
of Alaska.

INTEGRATE TELECOMMUNICATIONS AND CABLE OPERATIONS

The Company has begun integrating the Cable Systems into its preexisting
operations. As part of this integration, the Company plans to combine the
marketing and sales organizations, the billing systems, MIS and customer service
organizations of the Cable Systems with those of the Company's historical
operations. This integration will enable the Company to coordinate the marketing
of its telecommunications and cable services to the full range of the Company's
customers, promote introduction of new products and services, leverage consumer
awareness of the GCI brand name and provide its customers with a single bill and
point-of-contact for customer service. The Company estimates that the essential
elements of this integration will be completed by late 1997.

EXPAND ADDRESSABLE MARKET

The Company intends to offer local exchange services in Anchorage and other
major Alaskan population centers principally using its own network facilities.
The Company expects to provide local exchange services initially in Anchorage in
the second half of 1997. The Company has installed 38 miles of a planned
130-mile fiber optic network in Anchorage, installed a Lucent 5ESS switch with
both local and long distance capabilities and has entered into an agreement with
the incumbent LEC, ATU, to interconnect the Company's network with that of ATU
and to purchase unbundled local loops necessary to provide local service. The
Company's agreement with ATU has been approved by the APUC. The Alaskan local
service market generated approximately $320 million in revenues in 1996,
approximately 32% of which were attributable to Anchorage. The Company
anticipates expanding its local service to the Fairbanks and Juneau markets
during 1998 and to other markets during 1999, subject to negotiating acceptable
interconnection arrangements with the LECs serving those markets and to
obtaining the necessary regulatory approvals.

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INCREASE PENETRATION OF ALL MARKET SEGMENTS

IMPROVE CONSOLIDATED OPERATING MARGINS AND CAPITAL UTILIZATION

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average access charge payable by it to Alaskan LEC's for originating or
terminating interstate access is approximately $0.043 per minute of traffic and
for originating or terminating intrastate access is approximately $0.07 per
minute of traffic (or a total of approximately $0.14 for both originating and
terminating access).

ALASKAN VOICE, VIDEO AND DATA MARKETS

The Alaskan voice, video and data markets are unique within the United
States. Alaska is physically distant from the rest of the United States and is
characterized by large geographical size and relatively small, dense population
clusters (with the exception of major population centers such as Anchorage,
Fairbanks and Juneau). It lacks a well-developed terrestrial transportation
infrastructure, and the majority of Alaska's communities are accessible only by
air or water. As a result, Alaska's telecommunications networks are different
from those found in the lower 49 states. Alaska today relies extensively on
satellite-based transmission for intrastate calling between remote communities
where investment in a terrestrial network would be uneconomic or impractical.
Also, given the remoteness of Alaska's communities and, in many cases, lack of
major civic institutions such as hospitals, libraries and universities, Alaskans
are dependent on telecommunications to access the resources and information of
large metropolitan areas in the rest of the U.S. and elsewhere. In addition to
satellite-based communications, the telecommunications infrastructure in Alaska
includes traditional copper wire, digital microwave links between Anchorage and
Fairbanks and Juneau and fiber optic cable. For interstate and international
communication, Alaska is currently connected to the lower 48 states by undersea
fiber optic cable with a capacity of nine DS3s and is backed-up by additional
satellite capacity. Calls to Hawaii and international calls are routed from the
lower 48 states by various means.

Prior to 1982, Alascom, Inc. ("Alascom") was the sole long distance carrier
in Alaska. Alascom was required to maintain a number of low bandwidth links and
expand service to remote or less developed areas of the state. Interstate rates
initially charged for Alaskan telecommunications services were substantially
higher than interstate rates in the contiguous states. In 1972, the FCC
established a policy of rate integration intended to equalize all domestic
interstate rates based on distances of calls. This policy was used to support a
subsidy mechanism to help Alascom cover higher costs associated with rural
operations. When the Company began providing interstate long distance service in
1982, AT&T provided almost all of the telecommunications services in the lower
49 states, and Alascom provided almost all of the long distance
telecommunications services in Alaska and between Alaska and the lower 49 states
and foreign countries. Although Alascom's business was highly subsidized, the
Company competed in long distance services against Alascom without the advantage
of a subsidy. In 1983, the State of Alaska petitioned the FCC to initiate a
rulemaking to determine how to rationalize the policies of rate integration and
competition in the Alaskan market in light of the rapid changes in the
telecommunications industry brought on by the AT&T divestiture and changing FCC
competition policies. This action ultimately led to a negotiated buyout of
Alascom from Pacific Telecom, Inc. ("PTI") by AT&T in August 1995 for
consideration of approximately $290 million. After the buyout, Alascom changed
its name to AT&T Alascom. See "--Competition" and "--Regulation."

The Alaskan telecommunications business today comprises three distinct
markets: long distance services (interstate and intrastate), local exchange
services and wireless communications services (cellular and, eventually, PCS).
In the long distance market, the Company competes against AT&T Alascom and ATU,
and may in the future compete against other new market entrants. In the local
exchange market, the Company will compete against various incumbent local
exchange carriers, including ATU in the Anchorage area and PTI in Juneau. PTI is
also expected to be the local exchange

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carrier in Fairbanks by the end of 1997. In the wireless communications market,
the Company's PCS business expects to compete against the cellular subsidiaries
of AT&T and ATU in the Anchorage market and the cellular subsidiaries of PTI and
others outside of Anchorage. Other PCS providers may compete against the Company
as well, although the Company is unable to determine the extent of this
competition at the present time. For calendar year 1996, the aggregate
telecommunications market in Alaska generated revenues of approximately $738
million. Of this amount, approximately $383 million was attributable to
interstate and intrastate long distance service, approximately $320 million was
attributable to local exchange services, and approximately $35 million was
attributable to wireless communications services. Over the five-year period
ended December 1996, these markets have grown, in aggregate, at a compounded
annual rate of approximately 8%.

The market for programmed video services in Alaska includes traditional
broadcast television, cable television, wireless cable, and direct broadcast
satellite ("DBS") systems. The urban centers in Alaska are served by broadcast
television stations including network affiliates and independent stations.
Anchorage, Fairbanks and Juneau are served by seven, four and two broadcast
stations, respectively. In addition, several smaller communities such as Bethel
are served by one local television station. Approximately 240 rural communities
receive a single state-sponsored channel of television by a satellite dish and a
low power transmitter. Anchorage and Fairbanks are served by a UHF subscription
television operator that has been successful in gaining customers, particularly
in areas not served by cable. Additionally, Anchorage is served by a MMDS
operator that has made minor inroads into the Company's cable customer base.

In Alaska, cable television was introduced in the 1970s to provide
television signals to communities with few or no available off-air television
signals and to communities with poor reception or other reception difficulties
caused by terrain interference. Since that time, as on the national level, the
cable television providers in Alaska have added non-broadcast programming,
utilized improved technology to increase channel capacity and expanded service
markets to include more densely populated areas and those communities in which
off-air reception is not problematic.

Recently, both broadcast television and cable operators have had to compete
against new entrants to the market including wireless cable and DBS operators.
In cities with higher population densities, MMDS or wireless cable operators can
now deliver video signals to homes with line-of-sight access to the transmitting
location. In both urban and rural locations, DBS operators offer satellite-based
programming packages to subscribers. Because of Alaska's high latitude, DBS
signals are not as strong as they are in the lower 48 states and currently
require the use of receiving dishes that are substantially larger (ranging
generally from three feet to six feet in diameter) than those required in the
lower 49 states. In addition, the relatively low altitude above the horizon of
DBS satellites in the eastern portion of the satellite arc when viewed from
Alaska makes their signals subject to blockage from mountains, buildings and
other structures. MMDS also requires that customers' receiving antennas have
line-of-sight access to transmitting radio towers, and both MMDS and DBS signals
are subject to interference from rain, snow and wind. Future satellite launches
may provide enhanced service and signal quality to DBS providers operating in
Alaska. Recent published reports indicate that there has been a substantial
increase in the number of DBS subscribers in the United States in recent years.
Thus, although it is difficult to assess the ultimate impact that DBS will have
on the cable industry or upon the Company's financial condition and results of
operations, DBS services may pose a significant competitive threat to cable
television systems.

At present, 21 communities and areas in Alaska, including the state's three
largest urban areas (Anchorage, Fairbanks and Juneau) are served by the Cable
Systems. As of March 31, 1997, the Cable Systems passed 162,711 homes or
approximately 70% of all households in Alaska and served approximately 104,400
subscribers (92,940 equivalent basic subscribers), representing 64% of
households passed by the Cable Systems. It is difficult if not impossible to
determine the exact number of homes passed by cable in Alaska because many rural
communities served by cable are very small and the cable systems are
independently owned and operated. A number of cable operators other than

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the Company provide cable service in Alaska. All of these companies are
relatively small, with the largest having fewer than 6,000 subscribers.
Aggregate revenues for all providers in the Alaskan cable television market are
estimated to be $62.0 million for 1996, a 4.0% increase over the prior year.

LONG DISTANCE OPERATIONS

SERVICES

The Company commenced providing interstate long distance service in November
1982 and commenced providing intrastate long distance service in May 1991. The
Company provides a full range of long distance services, including direct dial,
800 message toll, private line, private network, operator, and calling and debit
card services, to residential, commercial and government customers and to other
common carriers. The Company also sells data communication equipment and offers
technical services.

As of March 31, 1997, approximately 90% of total Alaskan access lines were
accessible through the Company's satellite, fiber optic or leased digital
microwave networks. As of March 31, 1997, the Company's residential customers
were served by approximately 81,150 access lines, representing approximately 41%
of all Alaskan residential presubscribed access lines. In addition, the Company
had over 11,000 commercial, governmental and other common carrier customers who
were served by approximately 57,600 access lines, representing approximately 48%
of all non-residential presubscribed access lines in the State. All service
areas constructed prior to January 1, 1996 in which the Company has facilities
have completed the equal access balloting process (which permits customers to
designate their preferred long distance carrier). Among these communities, the
Company carries 33% to 49% of the southbound interstate message toll service
("MTS") traffic and 21% to 48% of the intrastate MTS traffic originating in
these service areas. Among the sites constructed in 1996, the communities of
Barrow, Bethel, Nome, Togiak and Unalakleet have completed the equal access
balloting process. The communities of Ekwak, New Stuyahok, Kollganek and
Levelock also completed the equal access balloting process in 1997. The Company
is currently negotiating equal access conversion with the LECs in the remainder
of the sites constructed in western Alaska during 1996.

The Company provides interstate and intrastate switched MTS and private line
and private network communication services between the major communities in
Alaska, and to and from the lower 49 states and foreign countries. The Company's
message toll services include intrastate, interstate and international direct
dial, 800, calling and debit card, operator and enhanced conference calling, as
well as termination of northbound toll service for MCI, Sprint and several
resellers who do not have facilities of their own in Alaska. The Company also
provides origination of southbound calling card and 800 toll services for MCI
and Sprint customers. Regulated telephone relay services for the deaf,
hard-of-hearing and speech-impaired are provided through the Company's operator
service center. The Company offers its message toll services to commercial,
residential, government and other common carrier customers. Subscribers may
generally cancel service at any time. Toll related services accounted for
approximately 82.7% of the Company's total telecommunications services revenues
in 1996. Private line and private network services utilize voice and data
transmission circuits, dedicated to particular subscribers, which link an office
in one location to another in a different location. The Company provided private
line and private network communication products and services to approximately
769 commercial and government accounts in 1996. Private line and private network
communication products and services generated $14.9 million in revenue in 1996
or approximately 9.6% of total telecommunications services revenues.

Although the Company has several agreements to facilitate the origination
and termination of international toll traffic, it has neither foreign operations
nor export sales. Revenues associated with international toll traffic were $6.3
million in 1996.

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The following table summarizes the Company's switched MTS traffic minutes
for the periods indicated:

<TABLE>
<CAPTION>
INTERSTATE MINUTES
-------------------------------------
SOUTHBOUND NORTHBOUND INTER-
FOR YEAR ENDED (TO LOWER 49 (FROM LOWER CALLING INTRASTATE NATIONAL
DECEMBER 31, STATES) 49 STATES) CARD MINUTES MINUTES TOTAL
- --------------- ------------ ------------ --------- ----------- ----------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1993 203,729 144,994 16,260 70,220 4,251 439,454
1994 231,226 158,059 17,466 79,641 5,318 491,710
1995 263,023 176,893 18,215 93,370 6,385 557,886
1996 326,471 209,154 26,459 121,208 7,524 690,816
</TABLE>

In addition to providing communication services, the Company designs, sells,
services and operates, on behalf of certain customers, dedicated communication
and computer networking equipment and provides field/depot, third party,
technical support, consulting and outsourcing services through its systems sales
and service business. The Company's equipment sales and services revenue was
$9.8 million in the year ended December 31, 1996, or approximately 6.3% of total
telecommunications services revenues. The Company has expanded its technical
services business to include outsourcing, onsite technical contract services and
telecommunications consulting. The Company manages substantially all of the
telecommunications and computer networking assets of BP Exploration (Alaska),
the largest oil company presently operating in Alaska, pursuant to a contract
that expires on December 31, 1997. The Company is currently negotiating a
three-year extension of such contract and expects to finalize the extension
shortly. The Company was also awarded a five-year contract, effective October
31, 1995, to assume management responsibility for all of the telecommunications
and computer networking assets of National Bank of Alaska.

SIGNIFICANT CUSTOMERS

In 1993, the Company entered into a significant business relationship with
MCI which includes the following agreements: (i) the Company agreed to terminate
all Alaska-bound MCI long distance traffic and MCI agreed to terminate all of
the Company's long distance traffic terminating in the lower 49 states,
excluding Washington, Oregon and Hawaii (the "MCI Traffic Carriage Agreement");
(ii) MCI licensed certain service marks to the Company for use in Alaska; (iii)
MCI, in connection with providing to the Company credit enhancement to permit
the Company to purchase a portion of an undersea cable linking Seward, Alaska,
with Pacific City, Oregon, leased from the Company all of the capacity owned by
the Company on the undersea fiber optic cable and the Company leased such
capacity back from MCI; (iv) MCI purchased certain service marks of the Company;
and (v) the parties agreed to share some communications network resources and
various marketing, engineering and operating resources. The Company also handles
MCI's 800 traffic originating in Alaska and terminating in the lower 49 states
and handles traffic for MCI's calling card customers when they are in Alaska,
while MCI originates calls for the Company's calling card customers when they
are in the lower 49 states. Concurrently with entering into these agreements,
MCI purchased approximately 31% of the then outstanding Class A Common Stock and
approximately 31% of the then outstanding Class B Common Stock and presently
controls nominations to two seats on the Board pursuant to the Voting Agreement.
Concurrently with the Company's acquisition of the Cable Systems, MCI purchased
an additional 2.0 million shares of Class A Common Stock for $13.0 million or
$6.50 per share, a 30% premium to the market price of $5.00 per share
immediately preceding the announcement of the Company's acquisition of the Cable
Systems. As of May 15, 1997, MCI owned 22.6% of the outstanding combined Common
Stock, representing 26.6% of the total voting power of the Common Stock. After
giving effect to the Stock Offering, MCI will own 19.4% of the outstanding
combined Common Stock, representing 24.5% of the total voting power of the
Common Stock. See "--Cable Television" and "Principal and Selling Shareholders."

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Revenues attributed to the MCI Traffic Carriage Agreement, which expires in
2001, were approximately $29.2 million in 1996, or approximately 17.7% of total
revenues. The contract was amended in 1996 to reduce the rate to be charged by
the Company for southbound MCI traffic for the period April 1, 1996 through July
1, 1999 and thereafter. The rate reduction, if applied to the number of
southbound minutes carried by the Company in all of 1996, would have been
approximately $570,000.

In 1993, the Company entered into a long-term agreement with Sprint pursuant
to which the Company agreed to terminate all Alaska-bound Sprint long distance
traffic and Sprint agreed to handle substantially all of the Company's
international traffic. Services provided to Sprint pursuant to the contract,
which expires in 1999, resulted in revenues in 1996 of $18.8 million, or 11.4%
of total revenues.

NETWORK

The Company's C-band satellite network currently uses six leased C-band
transponders on the Galaxy IX satellite and will transition to six owned C-band
transponders on the Galaxy X satellite that is expected to be launched in
mid-1998. The Company's MTS services and private line and network services
(excluding VSAT services) are distributed primarily via its C-band satellite
network which is also used for transmissions to remote areas of Alaska. In
connection with its C-band distribution network, the Company owns and operates
five 13-meter earth stations in Anchorage, Fairbanks and Juneau, Alaska,
Issaquah, Washington and Dallas, Texas. In addition, the Company owns and
operates six 9-meter and three 7-meter earth stations throughout the State. The
Company also owns 49% of a 13-meter earth station on Adak Island, providing MTS
and private line services. During 1996, the Company installed its six 9-meter
earth stations in Barrow, Kotzebue, Nome, Bethel, Dillingham, and King Salmon,
Alaska.

The Company also uses its C-band satellite capacity to operate a Demand
Assigned Multiple Access ("DAMA") satellite network to serve rural communities
in Alaska, which includes features of both a toll switch and a satellite
transmission network. Most existing satellite technology relies on fixed channel
assignments to a central hub. The Company's DAMA communication technology,
developed in 1994, assigns satellite capacity on an as needed basis. The digital
DAMA system allows calls to be made between remote villages using only one
satellite hop, thereby reducing satellite delay and capacity requirements while
improving quality. The Company has obtained the necessary APUC and FCC approvals
waiving current prohibitions against construction of competitive facilities in
rural Alaska. A four-module demonstration system was constructed in 1994 and was
integrated into the Company's telecommunications network in 1995. The Company's
56-site DAMA project in rural communities of Alaska is substantially complete,
and half of the sites are currently providing service. The DAMA system is
currently capable of interfacing with LECs using standard toll to local office
signaling protocols. A signaling system number 7 ("SS7") interface to DAMA
signaling capabilities is currently under development, as is an integrated
services digital network ("ISDN") rate interface capability.

The Company's Ku-band satellite network uses one leased Ku-band transponder
on the Hughes SBS5 satellite and will transition to an owned Ku-band transponder
on the Galaxy X satellite once that satellite is successfully launched. The
Ku-band network is higher power and is used primarily for point-to-point data
communications. The Company's Ku-band network comprises an 8.1-meter hub station
located in Anchorage and a 7.3-meter hub station located near Seattle,
Washington from which the Company provides services to 98 VSAT earth stations
located throughout the state of Alaska, 95 VSAT earth stations in Hawaii and 6
VSAT earth stations in the lower 48 states. Substantially all of these VSAT
earth stations are owned by the Company's customers.

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The majority of the Company's interstate long distance traffic is carried to
and from the contiguous 48 states over the Seward, Alaska branch of the undersea
fiber optic cable that connects Pacific City, Oregon to Miura, Japan. Of the
nine DS3s of capacity between Seward and Pacific City in this undersea cable,
the Company owns one and leases 28% of another DS3 channel.

The Company utilizes leased digital microwave facilities to carry long
distance traffic within and between Anchorage, Fairbanks and Juneau. These
facilities are leased from AT&T Alascom under agreements that provide for annual
lease payments of approximately $2.4 million in 1997, $2.5 million in 1998 and
decreasing to approximately $662,000 in 1999. The Company's business plan
anticipates a reduction in its use of leased digital microwave facilities from
AT&T Alascom as it expands its own facilities.

The Company's switched network consists of three medium capacity Digital
Switch Corp. DEX digital toll switches located in Anchorage, Fairbanks and
Juneau, the three main urban centers in Alaska. The Company owns and operates
these switching centers as well as a fourth digital toll switch in Seattle,
Washington. The Company leases switching capacity in Dallas, Texas from GTE
Telecom. These switches provide a wide range of toll services including routing
of direct dial, calling card, toll free and operator assisted calls.

Since 1990, the Company has utilized SS7 in its main toll switched network
to speed call setup and provide enhanced service. In 1993, the Company began SS7
interconnection with other interexchange carriers and local exchange carriers so
that approximately half of the state's interstate direct dial and toll free (800
and 888) traffic is currently processed using SS7 signaling. The Company leases
and operates a toll tandem switch located in Anchorage that provides the
Company's first intelligent network service for routing of toll free calls.

The Company's future switched network plans call for consolidating its
network on new combined long distance and local switches. Such a switch (a
Lucent 5ESS switch) was installed in Anchorage for activation in April 1997 and
was interconnected with the incumbent LEC's network in May 1997 for the exchange
of local access traffic. Additional 5ESS combined long distance/local switches
are planned for installation in Fairbanks and Juneau in 1998 and in Seattle,
Washington in 2000. These new switching systems will enable the Company to offer
local and long distance traffic, as well as operator assisted calls, via a
single switching platform. The switches will be service switching point ("SSP")
functional, allowing the removal of the Company's current leased toll tandem
switch. In early 1998, the Company plans to add enhanced SS7 signaling
capabilities and to introduce advanced intelligent network switched services.

The Company plans to construct a state-of-the-art undersea fiber optic
network connecting Anchorage to Seattle, Washington, with a spur to Juneau and a
terrestrial connection to Fairbanks. The system will use optical amplifiers and
is designed to accommodate growth from an initial equipped capacity of OC-48 on
each city-pair segment to at least OC-192 by the addition of terminal equipment
at the landing stations. The physical configuration will include a cable
extending from the Seattle, Washington landing station to the Whittier, Alaska
landing station with an offshore branching unit connected to the Juneau landing
station. Redundant, ring-protected inland extensions will be constructed from
the Whittier and Seattle landing stations to their adjacent primary cities. At
Juneau, the Company's existing fiber network will provide the inland extension.
The submarine cable portion of the project will be constructed on a turn-key
basis by the Company's supplier. The Company has completed the necessary marine
survey and expects to enter into a supply contract in time to allow the
beginning of commercial service in late 1998. The anticipated service life of
the cable is 25 years.

The traffic patterns experienced by the Company in the Alaskan market vary
by location. The majority of interstate traffic is carried to and from the lower
49 states by undersea fiber optic cable, with some traffic carried by leased
digital microwave facilities and satellite. In Anchorage, 93% of interstate long
distance traffic is routed to and from the lower 49 states via undersea fiber
and 7% of interstate

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<PAGE>
traffic is routed via satellite. In Fairbanks, interstate traffic is split 50%
on a combined route of leased digital microwave facilities and undersea fiber
and 50% routed via satellite. Juneau's interstate traffic is routed entirely by
satellite. Anchorage's intrastate traffic to Fairbanks is routed via leased
digital microwave facilities and intrastate traffic to Juneau is routed 52% by
leased digital microwave facilities and 48% by satellite. Intrastate traffic
between Juneau and Fairbanks is carried by leased digital microwave facilities.
In addition, the Company carries some traffic between Juneau and Ketchikan and
Sitka via leased digital microwave facilities. All other intrastate traffic is
carried predominantly by satellite.

The Company recently installed a new network monitoring and control center
in Anchorage, Alaska. The new control center enables the Company to centralize
its network personnel and to remotely monitor and reconfigure the network as
needed. This capability will result in more efficient use of the Company's
personnel for maintenance of the Company's facilities.

CABLE TELEVISION

The Cable Systems serve 21 communities and areas in Alaska including
Anchorage, Fairbanks and Juneau, the state's three largest urban areas. As of
March 31, 1997, the Cable Systems passed 162,711 homes or approximately 70% of
all households in Alaska and served approximately 104,400 subscribers (92,940
equivalent basic subscribers), representing 64% of households passed by the
Cable Systems. As of March 31, 1997, the Cable Systems consisted of
approximately 1,765 miles of installed cable plant having between 300 and 450
MHz of channel capacity (or enough capacity to carry between 36 and 60
channels). The Cable Systems generated combined revenues for the year ended
December 31, 1996 of approximately $55.3 million and EBITDA before management
fees of approximately $27.0 million, or 48.8% of cable revenues. On a pro forma
basis, assuming the Cable Systems had been acquired by the Company as of January
1, 1996, revenues and EBITDA from cable services would have represented 26.3%
and 55.7%, respectively, of the Company's consolidated revenues and EBITDA for
1996. During the five-year period ended December 31, 1996, the Cable Systems
achieved compounded annual revenue growth of approximately 4.1% on an historical
combined basis.

The following table sets forth selected combined data regarding the Cable
Systems as of December 31, 1994, 1995 and 1996. All data is approximate and
excludes data from two immaterial Cable Systems:

<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31,
-------------------------------------------- ---------
1994 1995 1996 1997
----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Homes passed............................ 157,278 159,486 162,395 162,711
Equivalent basic subscribers............ 92,623 94,502 93,391 92,940
Basic penetration....................... 58.9% 59.3% 57.5% 57.1%
Premium service units................... --(1) --(1) 77,609 75,521
Premium penetration..................... --(1) --(1) 83.1% 81.3%
Average monthly revenue per equivalent
basic subscriber...................... $ 45.16 $ 46.76 $ 50.73 $ 48.98
</TABLE>

- ------------------------

(1) Comparable information is not available.

REGIONAL CABLE SYSTEMS

For internal management purposes, the Company has recently divided its cable
television systems into five regions, the Anchorage, Arctic, Interior,
Southcentral and Southeast regions. Most of the subscribers of the Cable Systems
are located in Anchorage, the largest of the systems, the Interior region, which
includes Fairbanks, and the Southeast region, which includes Juneau.

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ANCHORAGE REGION. The Anchorage Region includes cable systems serving
Anchorage and surrounding areas, including Eagle River, Chugiak, Fort Richardson
and Elmendorf Air Force Base. As of March 31, 1997, the Anchorage cable system
passed 100,926 homes and had 62,127 basic subscribers. The Anchorage cable
system offers basic service that includes 18 channels. In addition, subscribers
can subscribe to a cable programming service tier ("CPST")which includes 26
channels or a new product tier ("NP") which includes TNT, CNN, Discovery,
America's Talking, Outdoor Life and the Sci-/Fi Channel. Each optional tier is
available at additional cost. The Anchorage system is fully addressable, with
all optional services (other than broadcast basic) scrambled. Average monthly
revenues per subscriber in the region for 1996 were $45.60. The Anchorage system
currently has 885 miles of 450 MHz plant installed, of which 337 miles are
overhead and 548 miles are underground. The Company is upgrading the Anchorage
system to a 550/750 MHz hybrid fiber optic and coaxial cable network, including
the installation of approximately 130 miles of fiber optic cable. As of March
31, 1997, approximately 38 miles of fiber optic cable had been installed, with
completion expected in 1998. The fiber optic plant will originally support a 550
MHz analog platform with 200 MHz reserved for digital services. This fiber
network will also be used in conjunction with the Company's planned local
exchange and PCS operations in Anchorage.

SOUTHEAST REGION. The Southeast Region includes cable systems serving
Juneau, Sitka, Petersburg, Ketchikan and Wrangell. These systems passed 22,676
homes and had 18,416 basic subscribers as of March 31, 1997. The Juneau cable
system offers an 11-channel basic service package and two CPSTs, including CPST
1 that includes basic service plus an additional four channels and CPST 2 which
includes basic service plus an additional 34 channels. The Ketchikan cable
system offers an eight channel basic service and a CPST 1 which includes basic
service plus an additional 33 channels and a CPST 2 which includes basic
service, CPST 1 and an additional four channels. The Sitka cable system offers
an eight channel basic service and an expanded basic service which adds 38
additional channels to the basic service offering. The Petersburg and Wrangell
cable systems offer basic service which includes three channels, one of which is
a Public Broadcasting System ("PBS") channel. The CPST 1 includes basic service
and either 24 or 25 channels, and the CPST 2 adds an additional eight to 14
channels. In addition, both systems offer four to five channels of premium pay
service. Average monthly revenues per subscriber in the southeast region for
1996 were $44.97. The Juneau system was recently rebuilt to support a 450 MHz
platform using a fiber optic cable backbone. Sitka and Ketchikan are both also
at 450 MHz, and Petersburg and Wrangell are expected to be upgraded to 450 MHz
in 1997 from their current 300 and 330 MHz levels, respectively. Juneau is the
only cable system that is currently subject to rate regulation by the APUC; such
regulation extends only to the basic service tier.

INTERIOR REGION. The Interior Region includes cable systems serving
Fairbanks, Eielson Air Force Base, Fort Greeley, Fort Wainwright and the
community of North Pole. The Fairbanks cable system offers a "limited service"
tier which includes 12 channels and no pay-per-view service. In addition, a
"satellite service" option is available at additional cost which includes the
limited service options plus 24 additional channels. These systems passed 20,605
homes and had 9,901 basic subscribers as of March 31, 1997. Average monthly
revenues per subscriber in the region for 1996 were $40.24. Fairbanks will be
upgraded to a 450 MHz system in December 1997 and subsequently to 550 MHz, with
the four headends in the region slated to be interconnected with fiber optic
links and additional fiber optic cable to be deployed to give the primary
headend a direct link to local broadcasters. This will substantially improve
network feeds, especially for the area's military bases and the community of
North Pole.

SOUTHCENTRAL REGION. The Southcentral Region includes cable systems serving
Cordova, Homer Kenai, Kodiak, Seward, Soldotna and Valdez. The Kodiak, Valdez
and Cordova cable systems generally include basic service which includes three
channels, one of which is a PBS channel. The CPST 1 in these markets includes
basic service and either 24 or 25 channels and the CPST 2 adds an additional
eight to 14 channels. In addition, the Valdez and Cordova systems offer four to
five channels of premium pay service and the Kodiak system is capable of eight
channels of premium pay services and three channels

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<PAGE>
of pay-per-view programming. In 1994, the Kodiak system was rebuilt to add
addressability and the additional channel capacity. The Kenai cable system
offers a basic service including 32 channels as well as pay-per-view services.
The Seward cable system includes 39 channels packaged into two levels of
service. The basic service includes three channels, one of which is a PBS
channel. The CPST 1 includes basic service and 30 additional channels and five
channels of premium pay services are also offered. All of the channels, with the
exception of local origination programming, are received via satellite. In
addition, the system provides 12 channels to 300 outlets in a State of Alaska
correctional facility through a separate receive and headend site. The Homer
cable system offers a basic service consisting of seven channels, including
three local translator channels. A CPST available at additional cost, adds an
incremental 29 channels. All of the channels, with the exception of the local
translator channels and local origination programming, are received via
satellite. The Homer system is fully addressable and five channels of premium
pay services are available. These systems passed 14,858 homes and had 10,992
basic subscribers as of March 31, 1997. Average monthly revenues per subscriber
in the region for 1996 were $43.01. Bandwidths for cable plant in the region
vary from 300 to 450 MHz. The Company plans to upgrade all cable plant in the
region to 450 MHz during the second half of 1998.

ARCTIC REGION. The Arctic Region includes cable systems serving Bethel,
Kotzebue and Nome. The Bethel cable system offers a basic service package
consisting of 14 channels and a CPST which adds 13 channels at an additional
cost per month. The Kotzebue and Nome cable systems offer basic service which
includes three channels, one of which is a PBS channel. The CPST 1, which
includes basic service, also includes either 22 or 24 channels and the CPST 2
provides an additional eight or nine channels. In addition, both systems offer
four to five channels of premium pay service. All of the channels, with the
exception of one local translator and the local origination programming, are
received via satellite. These systems passed 3,646 homes and had 2,987 basic
subscribers as of March 31, 1997. Average monthly revenues per subscriber in the
region for 1996 were $61.31. Bandwidths for cable plant in the region vary from
300 to 450 MHz. The Company plans to upgrade all cable plant in the region to
450 MHz during the second half of 1998.

INTEGRATION WITH TELECOMMUNICATIONS OPERATIONS

In early 1997, the Company began integrating various telecommunications and
cable functions, including sales and marketing, customer service, public
relations, MIS, accounting and finance, human resources, and purchasing. In
connection with this functional integration, the Company intends to create a
billing system which will provide customers the option of receiving a single
bill for all services provided by the Company and to provide a single point of
contact for customer service. The Company believes that integration of these
functions will help maintain consistent policies and procedures within the
Company, will increase efficiency by reducing duplicative effort and expense,
and will enhance the Company's ability to cooperatively brand, market and
promote its telecommunications and cable services. The Company estimates that
the essential elements of this integration will be completed by late 1997.

PRIME MANAGEMENT AGREEMENT

In connection with its acquisition of the Cable Systems, the Company entered
into the Prime Management Agreement with Prime Management to manage the Cable
Systems. Assuming the Stock Offering is completed, the Voting Prime Sellers will
own 18.0% of the total outstanding combined Common Stock and will control
nominations to two seats on the Board pursuant to the Voting Agreement. See
"Management -- Voting Agreement," and "Principal and Selling Shareholders."

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<PAGE>
the Company is required to reimburse Prime Management for any costs and expenses
incurred by it in connection with the Cable Systems, including travel and
entertainment expenses. The contract states that such costs and expenses are not
anticipated to exceed $200,000 on an annualized basis. The Prime Management
Agreement has a term of nine years but either party may terminate the agreement
in its discretion after October 31, 1998. In addition, the agreement may be
terminated earlier under the following circumstances: (i) with respect to the
Cable Systems acquired from Prime, by the Company upon the termination or
revocation of the Company's cable television certificate of public convenience
and necessity or franchise for a cable system; (ii) upon the sale of all or
substantially all of the assets of the Cable Systems or the sale of all of the
equity interests in the Cable Systems; (iii) upon Prime Management's material
breach of the agreement and failure to cure within 30 days; (iv) by Prime
Management upon the Company's material breach of the agreement and failure to
cure within 30 days; or (v) by either party upon 30 days written notice if the
other party shall enter into certain events involving bankruptcy, insolvency or
reorganization.

LOCAL EXCHANGE SERVICES

The Company intends to offer local exchange services in Anchorage and other
major Alaskan population centers principally over its own network facilities and
resold local loops beginning in Anchorage in the second half of 1997. The
Company's entry into the local exchange services market will enable it to
cross-sell its long distance, wireless communications, cable and Internet
services. By offering cross-program discounts, the Company believes it can
attract a larger market share and improve customer retention rates. The Company
believes it can also save access costs it would otherwise pay to incumbent LECs.
The Company intends to provide a full-featured competitive local service,
including basic dialtone, custom local access signaling, centrex, voice mail,
ISDN, directory listing, directory assistance, inside wire and equipment
maintenance, and local private line services. The Company plans to offer local
exchange services initially in Anchorage to its existing long distance customers
and then to Internet service providers and other businesses, including large
business accounts.

The Company estimates that statewide 1996 local exchange service revenues
totaled approximately $320 million, inclusive of local access revenues of
approximately $174 million. The current local access market in Anchorage
comprises over 160,000 access lines. Fairbanks and Juneau have approximately
31,000 and 19,000 access lines, respectively. Total incumbent local exchange
revenues in Anchorage for 1996 were in excess of $102 million, including
approximately $28.9 million in dialtone, $8.8 million in enhanced services,
$25.2 million in access charges, $7.6 million in subscriber line charges, $17.5
million in yellow page revenue, and about $14 million in other revenues.

ATU, the incumbent LEC in Anchorage, and the Company have entered into an
interconnection agreement which was arbitrated and approved by the APUC. The
APUC, as part of the arbitration and approval process, established an immediate
effective date for the interconnection agreement, as of January 14, 1997. While
some initial delays have occurred and unexpected delays may occur in the future,
interconnection implementation with ATU is currently proceeding. The
interconnection agreement provides for the interconnection and exchange of local
traffic between the Company and ATU under the provisions of the 1996 Telecom
Act, and has set rates for wholesale service, unbundled network element resale
and colocation.

On May 20, 1997, the Company filed an action requesting preliminary and
permanent injunctive relief against ATU in the U.S. District Court at Anchorage.
The suit seeks immediate implementation of transitional local number
portability. The Company believes that the obligation on the part of ATU to
provide number portability is explicit in Section 251(b)(2) of the 1996 Telecom
Act and the method for implementation is contained in the interconnection
agreement between the parties. The Company alleged that ATU repudiated its
obligation to immediately implement local number portability, citing the need
for additional regulatory adjudication on an ancillary issue. The Company
contends that the

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technical solutions for implementing local number portability and
interconnections are currently in place and have been tested, and the suit seeks
immediate implementation. No damages are sought.

The Company plans to provide local exchange service through one or more of
loop resale, facilities-based service and total system resale. Loop resale would
involve the use by the Company of only the incumbent LEC's local loop, the
copper wire pair that interconnects the subscriber's telephone equipment to the
LEC's central office. In connection with loop resale, the Company would colocate
or virtually colocate switching equipment at the LEC's wire center to enable
interconnection of these local loops to the Company's switches and transmission
network. In this case, with the exception of the use of the passive copper loop,
the Company could then offer its own switch and network-based services
independently from the incumbent LEC. Facilities-based service would include
service provided over the Company's fiber optic metropolitan area network
("MAN") and microwave radio facilities, and potentially through the use of
wireless local loop equipment and the coaxial cable television network. Total
system resale would involve the purchase of discounted retail end-to-end service
from the incumbent LEC, which provides all physical facilities for switching and
transmission of the call.

In 1996, the Company commenced construction of its Anchorage MAN. The MAN
will enable the Company to provide facilities-based local exchange services to
the full range of the Company's customers in Anchorage as well as local access
services to AT&T Alascom or other interexchange carriers. The MAN will also
permit the Company to provide high speed data services for large commercial
customers. As of March 1997, the Company had installed approximately 38 miles of
fiber optic cable and expects to complete construction of the planned 130 mile
Anchorage MAN in 1998. The Company has installed a new host local switch, a
Lucent Technologies 5ESS, in Anchorage and expects to complete system acceptance
testing and interconnection of that switch to the Anchorage MAN during the
second quarter of 1997. The Company also plans to install six remote switches at
six of ATU's eight end-offices beginning in the second quarter of 1997, and
intends to complete these installations in the second half of 1997. At a seventh
ATU end-office, the Company intends to install subscriber line carrier (SLC)
equipment. As part of the MAN, the Company will extend new fiber optic cable
facilities into large multi-tenant commercial buildings and into Anchorage's
largest multiple dwelling residential units.

The Anchorage fiber optic MAN will benefit the Company's cable television
transmission infrastructure because it can be used to reduce the cascade depth
of a portion of the existing coaxial cable trunk plant between the cable headend
facilities and various neighborhood distribution feeder networks. This hybrid
fiber-coaxial architecture will provide increased bandwidth and improved noise
and distortion suppression in the trunk plant through the reduction of coaxial
cable trunk amplifier cascade depth. The system is being designed to provide up
to 750 MHz of usable bandwidth for a combination of 550 MHz analog and 200 MHz
digital cable video services.

The Company is currently planning the initial phase of construction for a
Fairbanks MAN, with construction of approximately 35 miles of fiber optic cable
expected to commence in late 1997. In connection with the acquisition of the
Cable Systems, the Company has also acquired fiber optic networks in Juneau and
Kodiak. These comprise an additional 52 miles of fiber optic cable plant. Plans
to interconnect long distance/local switches to the Fairbanks and Juneau MANs
are currently under development.

PCS

The Company plans to develop a wireless PCS network. PCS allows reception
and initiation of calls from any location within the area serviced by the PCS
network. The Company's PCS business segment will compete against traditional
cellular service providers and may, depending on the technology selected and
deployed, become an effective alternative to incumbent LEC facilities for local
exchange services in certain areas. The Company is reviewing various PCS
technologies and plans to settle on one technology by the end of 1997. The
Company's planned MAN networks will provide the fiber optic cable

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<PAGE>
backbone to link PCS cell sites in major population centers. The Company expects
to launch its PCS service in Anchorage in 1999 and in Fairbanks and Juneau in
2000.

In March 1995, the FCC completed a nationwide auction of A- and B-block PCS
licenses, each having 30 MHz of radio spectrum in the 1900 MHz band for private
development of PCS networks. In the FCC auction, Alaska was assigned two such 30
MHz bandwidths, designated statewide A-block PCS and statewide B-block PCS. The
A and B PCS licenses include build-out requirements which require that the
licensee provide service to one-third of licensed pops within five years (by
June 2000) and to two-thirds of licensed pops within ten years (by June 2005).
The FCC subsequently auctioned 30 MHz C-block licenses and 10 MHz D-, E- and
F-block licenses. The Company was the successful bidder for a 30 MHz statewide
B-block PCS license and paid approximately $1.65 million or about $3.00 per pop.

The small cell architecture of PCS systems and the nature of radio
propagation in PCS frequencies mean that PCS users will not be able to roam or
use their handsets outside of areas covered by PCS cells unless the PCS units
are also able to function as analog cellular handsets or consumers use a
separate analog handset when roaming. Although the Company is aware of several
suppliers with plans to manufacture such units, none are currently available. In
addition, the Company would be required to enter into interconnection agreements
with cellular suppliers or obtain licenses for use of cellular spectrum to
permit in-state roaming. Although the Company expects to enter into such
arrangements, none has as yet been made. The inability of PCS customers to use
their handsets outside of the areas covered by PCS cells may reduce the
attractiveness of PCS technology to potential customers. However, in Alaska, the
Company intends to cover all urban areas with PCS cells, reducing or eliminating
roaming for the vast majority of the population.

MARKETING AND SALES

The Company's marketing and sales strategy hinges on its ability to leverage
(i) its unique position as an integrated provider of multiple telecommunications
and cable services, (ii) its well-recognized and respected brand name in the
Alaskan marketplace and (iii) its leading market positions in long distance and
cable television services. By pursuing a marketing strategy that takes advantage
of these characteristics, the Company believes it can increase its market
penetration, improve customer retention rates, increase its share of its
customers' aggregate voice, video and data services expenditures and achieve
continued growth in revenues and operating cash flow.

The Company's marketing and sales organization is comprised of approximately
295 people. This organization is subdivided into four subsidiary marketing
groups, each having responsibility for marketing all relevant telecommunications
or cable services to the Company's four principal customer groups, which include
consumer, commercial, other common carrier and rural customers. The four
customer-group heads and the director, customer operations (customer service and
operator services) all report to the Senior Vice President--Sales and Marketing.

The Company's consumer marketing group consists of 24 employees. The
marketing team is supported by a customer service group staffed by approximately
129 sales or customer service representatives. The Company historically competed
in the residential market primarily on the basis of price. However, as price
competition intensified in recent years, the Company has shifted to a strategy
that places increased emphasis on strong customer service, that rewards
consumers for their loyalty to the Company and that focuses on the development
of value-added services. In this regard, the Company has expanded its customer
service group, adopted creative promotions that offer rebates to customers on
the basis of usage volumes and length of service with the Company, and
introduced innovative billing solutions. The Company further intends to provide
residential customers with a package of high-quality diversified
telecommunications and cable services that will entice consumers to purchase
multiple services from the Company by offering package discounts, and will offer
a single bill and point of contact for customer service. The Company's
advertising strategy for this segment has relied, and will continue to rely,
heavily on television, radio and print media.

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The Company's commercial marketing group consists of 71 employees.
Commercial customers for telecommunications services have a wide variety of
experiences and needs. Many smaller businesses do not have the staff or
technical expertise to select from among the many alternatives available to
them, and respond well to a consultative approach from telecommunications
providers. The Company believes that by offering customers such as these a
diversified package of services from a single source, along with the technical
expertise to help them evaluate which service combinations will best fit their
individual requirements, the Company can provide significant value added
resources in implementing their telecommunications decisions. Similarly, large
businesses which have the resources and volume of telecommunications usage to
justify in house expertise frequently outsource these functions as a means of
increasing productivity and reducing expenses. These functions can effectively
be addressed by the Company.

The Company's marketing and sales organization has five employees that focus
on other common carrier marketing and sales. The group is responsible for
managing the Company's business with MCI and Sprint as well as other common
carriers and resellers purchasing services from the Company.

The unique characteristics of communities in rural Alaska have led the
Company to designate a separate group of eight employees to focus exclusively on
marketing to this segment of the Alaskan population, which comprises
approximately 23.1% of Alaska's total population. Because the large number of
small communities in rural Alaska have relatively little exposure to mass media,
and because these communities tend to be very tight-knit, the Company's
marketing approach to these communities emphasizes the development of trust
between the Company and community members through direct personal involvement by
Company employees in local business or community organizations and events.

COMPETITION

TELECOMMUNICATIONS. The telecommunications industry is intensely
competitive, rapidly evolving and subject to constant technological change.
Competition is based upon pricing, customer service, billing services and
perceived quality. Certain of the Company's competitors are substantially larger
and have greater financial, technical and marketing resources than the Company.
Although the Company believes it has the human and technical resources to pursue
its strategy and compete effectively in this competitive environment, its
success will depend upon its continued ability to profitably provide high
quality, high value services at prices generally competitive with, or lower
than, those charged by its competitors.

The Company's principal competitor in long distance services, AT&T Alascom,
has substantially greater resources than the Company. This competitor's
interstate rates are integrated with those of AT&T Corp. and are regulated in
part by the FCC. While the Company initially competed based upon offering
substantial discounts, those discounts have been eroded in recent years due to
the lowering of prices by AT&T Alascom. Under the terms of AT&T's acquisition of
Alascom, AT&T Alascom rates and services must "mirror" those offered by AT&T, so
changes in AT&T prices indirectly affect the rates and services of the Company.
AT&T's and AT&T Alascom's prices are regulated under a price cap plan whereby
their rate of return is no longer directly regulated or restricted. AT&T and
AT&T Alascom are allowed to raise and lower prices for three groups of services
within pre-established floor and ceiling levels with little regulatory
oversight. These services include products offered to the following: (i) small
businesses or residential customers; (ii) users of 800 services; and (iii) large
business and governmental customers. Price increases by AT&T and AT&T Alascom
generally improve the Company's ability to raise its prices while price
decreases pressure the Company to follow. The Company has, so far, successfully
adjusted its pricing and marketing strategies to respond to AT&T pricing
practices. However, if AT&T Alascom significantly lowers its rates, the Company
may be forced to reduce its rates, which could have a material adverse effect on
the Company's financial condition and results of operations.

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In the local exchange market, the Company believes that the 1996 Telecom Act
and state legislative regulatory initiatives and developments, as well as a
recent series of transactions and proposed transactions between telephone
companies, long distance carriers and cable companies, increase the likelihood
that barriers to local exchange competition will be substantially reduced or
removed. These initiatives include requirements that LECs negotiate with
entities such as the Company to provide interconnection to the existing local
telephone network, to allow the purchase, at cost-based rates, of access to
unbundled network elements, to establish dialing parity, to obtain access to
rights-of-way and to resell services offered by the incumbent LECs. Certain
pricing provisions of the FCC's decision implementing the interconnection
portions of the 1996 Telecom Act (the "Interconnection Decision") have been
challenged and are currently stayed by the U.S. Court of Appeals for the Eighth
Circuit, on a jurisdictional basis. While the stay may affect the level of
prices in the near term, it does not appear that it will limit or delay the
development of competition in the Alaskan local exchange switched services
market. In addition, the 1996 Telecom Act expressly prohibits any legal barriers
to competition in intrastate or interstate communications service under state
and local laws. The 1996 Telecom Act further empowers the FCC, after notice and
an opportunity for comment, to preempt the enforcement of any statute,
regulation or legal requirement that prohibits, or has the effect of
prohibiting, the ability of any entity to provide any intrastate or interstate
telecommunications service. See "--Regulation."

The 1996 Telecom Act provides incumbent LECs with new competitive
opportunities. The 1996 Telecom Act removes previous restrictions concerning the
provision of long distance service by LECs and also provides them with increased
pricing flexibility. Under the 1996 Telecom Act, the RBOCs will, upon the
satisfaction of certain conditions, be able to offer long distance services that
would enable them to duplicate the "one-stop" integrated telecommunications
approach used by the Company. The Company believes that it has certain
advantages over these companies in providing its telecommunications services,
including the Company's brand awareness by Alaskan customers, its owned
telecommunications network, and management's prior experience in, and knowledge
of, the Alaskan market. The 1996 Telecom Act provides that rates charged by
incumbent LECs for interconnection to the incumbent carrier's network are to be
nondiscriminatory and based upon the cost of providing such interconnection, and
may include a "reasonable profit," which terms are subject to interpretation by
regulatory authorities. If the incumbent LECs charge alternative providers such
as the Company unreasonably high fees for interconnection to the LECs' networks,
or significantly lower their retail rates for local exchange services, the
Company's local service business could be placed at a significant competitive
disadvantage. See "--Regulation."

In May 1996, ATU filed an application with the APUC to provide long distance
telecommunications services as a reseller of intrastate telecommunications
services throughout the State of Alaska. The application was acted upon
favorably in September 1996 and ATU began in April 1997 offering interstate and
intrastate long distance services in the Anchorage area on a
non-facilities-based basis.

Competition for the Company's PCS services will come primarily from
traditional cellular providers and new PCS entrants. Anchorage has mature
cellular systems in both the wireline (ATU) and non-wireline (AT&T Wireless)
license blocks that together have achieved approximately 20% penetration of
potential subscribers based on the number of existing wireline access lines.
Cellular service has not penetrated Fairbanks and Juneau to the same degree as
Anchorage. Cellular pricing has been high in Alaska compared to the lower 48
states, but rates in Anchorage have become more competitive since the Company
entered the cellular resale market two years ago.

Of the five other Alaskan PCS licensees, none have announced plans for
service in Alaska. The high cost of a PCS system infrastructure may deter some
license owners from building a system. PCS has the potential disadvantage when
compared to cellular service of requiring the licensee to enter into
interconnection agreements with cellular providers in order to permit PCS
subscribers with dual-mode handsets to continue to receive service once they
stray from the PCS service area. However, the Company

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believes that the portion of the Alaskan population which will need to operate
outside the Company's planned PCS service areas is small.

CABLE COMPETITION. Cable television systems face competition from
alternative methods of receiving and distributing television signals and from
other sources of news, information and entertainment such as off-air television
broadcast programming, radio, newspapers, movie theaters, live sporting events,
interactive computer services and home video products, including videotape
cassettes and laser disks. The extent to which a cable television system is
competitive depends, in part, upon the cable system's ability to provide quality
programming and other services at competitive prices.

The 1996 Telecom Act authorizes LECs and others to provide a wide variety of
video services competitive with services provided by cable systems and to
provide cable services directly to subscribers. See "--Regulation." Certain LECs
in Alaska may seek to provide video services within their telephone service
areas through a variety of distribution methods. The Cable Systems could be
placed at a competitive disadvantage if the delivery of video services by LECs
becomes widespread since LECs may not be required, under certain circumstances,
to obtain local franchises to deliver such video services or to comply with the
variety of obligations imposed upon cable systems under such franchises. Issues
of cross-subsidization by LECs of video and telephony services also pose
strategic disadvantages for cable operators seeking to compete with LECs who
provide video services.

Cable television systems generally operate pursuant to franchises granted on
a non-exclusive basis. The 1992 Cable Act gives local franchising authorities
jurisdiction over basic cable service rates and equipment in the absence of
"effective competition," prohibits franchising authorities from unreasonably
denying requests for additional franchises and permits franchising authorities
to operate cable systems. Well-financed businesses from outside the cable
industry (such as the public utilities that own certain of the poles on which
cable is attached) may become competitors for franchises or providers of
competing services. See "--Regulation."

The Cable Systems face limited additional competition from private satellite
master antenna television ("SMATV") systems that serve condominiums, apartment
and office complexes and private residential developments. The operators of
these SMATV systems often enter into exclusive agreements with building owners
or homeowners' associations. Due to the widespread availability of reasonably-
priced earth stations, SMATV systems now can offer both improved reception of
local television stations and many of the same satellite-delivered program
services offered by franchised cable systems. The ability of the Cable Systems
to compete for subscribers in residential and commercial developments served by
SMATV operators is uncertain. The 1996 Telecom Act gives cable operators greater
flexibility with respect to pricing of cable television services provided to
subscribers in multi-dwelling unit residential and commercial developments.
However, it also broadens the definition of SMATV systems not subject to
regulation as a franchised cable television service.

The availability of reasonably-priced home satellite dish earth stations
("HSDs") enables individual households to receive many of the
satellite-delivered program services formerly available only to cable
subscribers. Furthermore, the 1992 Cable Act contains provisions, which the FCC
has implemented with regulations, to enhance the ability of cable competitors to
purchase and make available to HSD owners certain satellite-delivered cable
programs at competitive costs.

In recent years, the FCC and the Congress have adopted policies providing a
more favorable operating environment for new and existing technologies that
provide, or have the potential to provide, substantial competition to cable
systems. These technologies include, among others, DBS services which transmit
signals by satellite to receiving facilities located on the premises of
subscribers. Programming is currently available to the owners of HSDs through
conventional, medium and high-powered satellites. Primestar Partners L.P., a
consortium comprised of cable operators and a satellite company, commenced
operation in 1990 of a medium-power DBS satellite system using the Ku portion of
the frequency spectrum and, as of December 31, 1996, provided service consisting
of approximately 95

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channels of programming, including broadcast signals and pay-per-view services.
DirecTV, which has entered into a marketing alliance with AT&T, began offering
nationwide high-power DBS service in 1994 accompanied by extensive marketing
efforts. Several other major companies are preparing to develop and operate
high-power DBS systems, including MCI and News Corp. DBS systems use video
compression technology to increase the channel capacity of their systems to
provide movies, broadcast stations and other program services competitive with
those of cable systems. The extent to which DBS systems are competitive with the
service provided by cable systems depends, among other things, on the
availability of reception equipment at reasonable prices and on the ability of
DBS operators to provide competitive programming. DBS services generally do not
currently provide local programming and DBS signals are subject to degradation
from atmospheric conditions such as rain, snow and wind. The receipt of DBS
service in Alaska currently has the disadvantage of requiring subscribers to
install larger satellite dishes (generally three to six feet in diameter) than
are generally required in the lower 48 states because of the weaker satellite
signals available in northern latitudes. In addition, existing satellites have a
relatively low altitude above the horizon when viewed from Alaska, making their
signals subject to interference from mountains, buildings and other structures.
Recent published reports indicate that there has been a substantial increase in
the number of DBS subscribers in the United States in recent years. Thus,
although it is difficult to assess the ultimate impact that DBS will have on the
cable industry or the Company's financial condition and results of operations,
DBS services may pose a significant competitive threat to cable television
systems.

Cable television systems also compete with wireless program distribution
services such as MMDS providers which use low-power microwave frequencies to
transmit video programming over-the-air to subscribers. There are MMDS operators
who are authorized to provide or are providing broadcast and satellite
programming to subscribers in areas served by several of the Cable Systems,
including Anchorage and Fairbanks. ATU recently purchased a 30% interest in one
such wireless operator that operates in the Anchorage and Fairbanks areas.
Additionally, the FCC has allocated frequencies in the 28 GHz band for a new
multichannel wireless video service similar to MMDS. MMDS operations have the
disadvantage of requiring that customers' receiving antennas have line-of-sight
access to transmitting radio towers, making their signals subject to
interference from mountains, buildings and other structures, and are subject to
interference from rain, snow and wind. The Company is unable to predict whether
competition from wireless video services will have a material impact on its
financial condition or results of operations.

Other new technologies may become competitive with non-entertainment
services that cable television systems can offer. The FCC has authorized
television broadcast stations to transmit textual and graphic information useful
to both consumers and businesses. The FCC also permits commercial and
non-commercial FM stations to use their subcarrier frequencies to provide
non-broadcast services including data transmissions. The FCC established an
over-the-air interactive video and data service that will permit two-way
interaction with commercial and educational programming along with informational
and data services. LECs and other common carriers also provide facilities for
the transmission and distribution to homes and businesses of interactive
computer-based services, including the Internet, as well as data and other
non-video services. The FCC has conducted spectrum auctions for licenses to
provide PCS. PCS will enable license holders, including cable operators, to
provide voice and data services. The Company recently acquired a state-wide PCS
license. See "--PCS."

Advances in communications technology as well as changes in the marketplace
are constantly occurring. The Company cannot predict the effect that ongoing or
future developments might have on the telecommunications and cable television
industries or on the Company.

PROPERTIES

The Company's executive offices and operating facilities for its
telecommunications operations are located in leased office space in Anchorage,
Fairbanks and Juneau, Alaska, and Seattle, Washington.

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The facilities in Fairbanks and Juneau, Alaska, and Seattle, Washington are
occupied under short-term operating lease agreements while one of the Anchorage
properties is leased pursuant to a 15-year capital lease agreement that expires
in 2007. The Company also owns or leases various earth station, microwave and
distribution sites used in its telecommunications operations and owns or leases
various local office, headend and tower sites used in its cable television
operations.

The Company's other properties consist mainly of equipment, including a
portion of the undersea fiber optic cable linking Alaska and Oregon that is
owned subject to an outstanding mortgage, cable television plant, head-end
distribution equipment, switches, microwave facilities and other electronic
equipment. Substantially all of the Company's properties and equipment are
subject to a security interest in favor of the Company's lenders. The Company
believes that its properties and equipment are in good condition and are
adequate for the Company's present needs.

ALASKAN ECONOMY

The Company offers voice, video and data services to customers primarily
throughout Alaska. As a result of this geographic concentration, the Company's
growth and operations depend upon economic conditions in Alaska. Alaska has a
population of approximately 600,000 people, approximately one-half of whom are
located in the Anchorage area. The economy of Alaska is dependent upon the
natural resource industries, and in particular oil production, as well as
tourism, mining, government, and United States military spending. Any
deterioration in these markets could have an adverse impact on the Company's
financial condition and results of operations. The oil industry over the past
several years has contributed in excess of 75% of unrestricted State government
revenues received from all segments of the Alaskan economy and is believed to be
directly or indirectly responsible for over one-third of Alaska's economic base.
Unrestricted State revenues are available for any legitimate governmental
purpose. The volume of oil transported by the TransAlaska Oil Pipeline System
over the past 20 years has been as high as 2.0 million barrels per day in 1988.
Over the past several years, it has begun to decline and is expected to average
approximately 1.4 million barrels per day in 1997. The volume of oil transported
by that pipeline is expected to decrease to 1.0 million barrels per day in less
than ten years, based upon available data regarding presently developed oil
fields using the pipeline for transport. The two largest producers of oil in
Alaska independently resolved in 1996 to redouble their efforts to explore,
develop and produce new oil fields in Alaska and to enhance recovery from
existing fields to offset the decline in production from the Prudhoe Bay field,
a major Alaskan oil field. Both companies have invested large sums of money in
developing and implementing enhanced oil recovery techniques at the Prudhoe Bay
field and other nearby fields. Effective March 1997, the State of Alaska passed
new legislation relaxing state oil royalties with respect to marginal oil fields
that the oil companies claim would not be economic to develop otherwise. No
assurance can be given that these two oil companies or other oil companies doing
business in Alaska will be successful in discovering new fields or further
developing existing fields which are economic to develop and produce oil with
access to the pipeline or other means of transport to market, even with the
reduced level of taxation. Should the oil companies not be successful in these
discoveries or developments, the trend of continued decline in oil production
from the Prudhoe Bay field area is inevitable with a corresponding adverse
impact on the economy of the State, in general, and on demand for
telecommunications and cable television services and, therefore, on the Company,
in particular.

The growth rate of the Alaskan economy was generally higher during the
11-year period of initial operation of the pipeline (1977-1988) both in the
private sector and in government spending as compared to the eight-year period
of operations since the downturn in oil throughput began in 1989. While other
Alaskan industries have experienced growth since 1988, including mining,
tourism, international air freight transportation, and retail sales, and while
state and federal government spending remain significant factors in the Alaskan
economy, revenues generated from oil production and oil support

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industry operations have remained the most significant segments of the Alaskan
economy. As such, the Alaskan economy is closely tied to the price of oil in the
international marketplace.

The Alaskan economy is also supported by the United States armed services
and the United States Coast Guard which maintain bases in Anchorage, Fairbanks,
Adak, Kodiak, and other communities in Alaska. The military presence in the
State of Alaska provides a significant source of revenues to the economy of the
State. The Company provides message toll services in a variety of ways to the
United States government and its armed forces personnel. The Company also
provides private lines for secured point-to-point data and voice transmission
services to military personnel. A reduction in federal military spending or
closure of a major facility in Alaska could have a substantial adverse impact on
the State and would both directly and indirectly affect the Company. Since 1994,
several minor military bases have closed or been scheduled for closure or are
operating at reduced strength. While troop strength in Alaska and the military's
share of the Alaskan labor force are at historically low levels, the military
remains one of the most significant contributors to Alaska's economy.

REGULATION

THE FOLLOWING SUMMARY OF REGULATORY DEVELOPMENTS AND LEGISLATION DOES NOT
PURPORT TO DESCRIBE ALL PRESENT AND PROPOSED FEDERAL, STATE, AND LOCAL
REGULATION AND LEGISLATION AFFECTING THE TELECOMMUNICATIONS AND CABLE TELEVISION
INDUSTRIES. OTHER EXISTING FEDERAL AND STATE REGULATIONS ARE CURRENTLY THE
SUBJECT OF JUDICIAL PROCEEDINGS, LEGISLATIVE HEARINGS AND ADMINISTRATIVE
PROPOSALS WHICH COULD CHANGE, IN VARYING DEGREES, THE MANNER IN WHICH THESE
INDUSTRIES OPERATE. NEITHER THE OUTCOME OF THESE PROCEEDINGS NOR THEIR IMPACT
UPON THE TELECOMMUNICATIONS AND CABLE TELEVISION INDUSTRIES OR THE COMPANY CAN
BE PREDICTED AT THIS TIME. THIS SECTION ALSO SETS FORTH A BRIEF DESCRIPTION OF
REGULATORY AND TARIFF ISSUES PERTAINING TO THE OPERATIONS OF THE COMPANY.

The federal government regulates interstate telecommunications through
various laws administered by the FCC. The 1996 Telecom Act, the most
comprehensive reform of the nation's telecommunications laws since the
Communications Act, was signed into law in February 1996. The 1996 Telecom Act
will result in changes in the marketplace for cable television, telephone and
other telecommunications services. In addition, cable television operators are
subject to the 1984 Cable Act, the 1992 Cable Act, and the 1996 Telecom Act, as
well as the rules and regulations of the FCC, and, where applicable, state and
local regulations.

FEDERAL REGULATION OF TELEPHONY. The 1996 Telecom Act promotes local
exchange competition as a national policy by eliminating legal barriers to
competition in the local telephone business and setting standards to govern the
relationships among telecommunications providers. The 1996 Telecom Act expressly
prohibits any legal barriers to competition in intrastate or interstate
communications service under state and local laws. The 1996 Telecom Act further
empowers the FCC, after notice and an opportunity for comment, to preempt the
enforcement of any statute, regulation or legal requirement that prohibits, or
has the effect of prohibiting, any entity from providing any intrastate or
interstate telecommunications service. Subject to this limitation, however, the
state and local governments retain a significant amount of their existing
regulatory authority. The 1996 Telecom Act imposes a variety of new duties on
incumbent local exchange carriers in order to promote competition in local
exchange and access services. Certain duties are also imposed on all LECs,
including new market entrants such as the Company. Some smaller telephone
companies may seek suspension or modification of these duties, and some
companies serving rural areas are exempt from these duties. The duties created
by the 1996 Telecom Act include the following:

<TABLE>
<S> <C>
Reciprocal Compensation Requires all LECs to complete calls originated by
competing carriers under reciprocal arrangements at
prices based on a reasonable approximation of long-run
incremental cost or through mutual exchange of traffic
without explicit payment.
</TABLE>

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<TABLE>
<S> <C>
Resale Requires all LECs to permit resale of their
telecommunications services without unreasonable
restrictions or conditions. In addition, incumbent LECs
are required to offer wholesale versions of all retail
services to other telecommunications carriers for resale
at discounted rates, based on the costs avoided by the
incumbent LEC in the wholesale offering.

Interconnection Requires incumbent LECs to permit all telecommunications
carriers including their competitors to interconnect
with their facilities. Such interconnection must be
provided to competitors at any technically feasible
point within their networks, on nondiscriminatory terms,
at prices based on cost (which may include a reasonable
profit). At the option of the carrier seeking
interconnection, physical colocation of the requesting
carrier's equipment in the incumbent LEC's premises must
be offered, except where the incumbent LEC can
demonstrate space limitations or other technical
impediments to colocation.

Unbundled Access Requires incumbent LECs to provide nondiscriminatory
access to unbundled network elements (including network
facilities, equipment, features, functions, and
capabilities) at any technically feasible point within
their networks, on reasonable, just and
nondiscriminatory rates, terms and conditions, at prices
based on long-run incremental cost (which may include a
reasonable profit). Such access must allow requesting
carriers to combine network elements to provide such
telecommunications services.

Number Portability Requires all LECs to permit users of telecommunications
services to retain existing telephone numbers without
impairment of quality, reliability or convenience when
switching from one telecommunications carrier to another
to the extent technically feasible.

Dialing Parity Requires all LECs to provide "1+" equal access to
competing providers of local exchange service and toll
service, and to provide nondiscriminatory access to
telephone numbers, operator services, directory
assistance, and directory listing, with no unreasonable
dialing delays.

Access to Rights-of-Way Requires all LECs to permit competing carriers access to
poles, ducts, conduits and rights-of-way at regulated
prices.
</TABLE>

Incumbent LECs are required to negotiate in good faith with
telecommunications carriers requesting any or all of the above arrangements.
Certain, but not all, FCC rules regarding pricing of interconnection agreements
have been stayed by the U.S. Court of Appeals for the Eighth Circuit in a case
challenging certain of the FCC's interconnection regulations. However, carriers
still may negotiate agreements, and if the negotiating carriers cannot reach
agreement within a prescribed time, either carrier may request binding
arbitration of the disputed issues by the relevant state regulatory commission.

The 1996 Telecom Act also eliminates previous prohibitions on the provision
of InterLATA long distance service by the RBOCs and the GTE Operating Companies
("GTEOCs"). The RBOCs are now permitted to provide InterLATA long distance
service outside those states in which they provide local

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exchange service ("out-of-region long distance service") upon receipt of any
necessary state or federal regulatory approvals that are otherwise applicable to
the provision of intrastate or interstate long distance service. Under the 1996
Telecom Act, the RBOCs will be allowed to provide long distance service within
the regions in which they also provide local exchange service ("in-region
service") upon specific approval of the FCC and satisfaction of other
conditions, including compliance with a checklist of regulations and policies,
including those pertaining to interconnection, designed to enhance competition
in the local marketplace. The GTEOCs are permitted to enter the long distance
market without regard to limitations by region, although regulatory approvals
otherwise applicable to the provision of long distance service will need to be
obtained. The GTEOCs are also subject to the provisions of the 1996 Telecom Act
that impose interconnection and other requirements on LECs.

The 1996 Telecom Act imposes certain restrictions on the RBOCs in connection
with the RBOCs' entry into long distance services. Among other things, the RBOCs
must pursue such activities only through separate subsidiaries with separate
books and records, financing, management and employees, and all affiliate
transactions must be conducted on an arm's length and nondiscriminatory basis.
The RBOCs are also prohibited from jointly marketing local and long distance
services, equipment and certain information services unless competitors are
permitted to offer similar packages of local and long distance services in their
market. Further, RBOCs must obtain in-region long distance authority before
jointly marketing local and long distance services in a particular state.
Additionally, AT&T and other major carriers serving more than 5% of the nation's
presubscribed long distance access lines are also restricted, under certain
conditions, from packaging their long distance services and local services
provided over RBOC facilities. These restrictions do not, however, apply to the
Company because it does not serve more than 5% of the nation's presubscribed
access lines.

Prior to passage of the 1996 Telecom Act, the FCC had already established
different levels of regulations for dominant and non-dominant carriers. For
purposes of domestic common carrier telecommunications regulation, large LECs
and the RBOCs are currently considered dominant carriers for the provision of
interstate access services, while other interstate services providers, such as
the Company, are considered non-dominant carriers. The FCC has recently proposed
that the RBOCs offering out-of-region interstate long distance services be
regulated as non-dominant carriers, as long as such services are offered by an
affiliate of the RBOC that complies with certain structural separation
requirements. The FCC regulates many of the rates, charges and services of
dominant carriers to a greater degree than non-dominant carriers.

As a non-dominant long distance carrier, the Company may install and operate
facilities for the transmission of domestic interstate communications without
prior FCC authorization, although FCC authorization is required for the
provision of international telecommunications by non-dominant carriers. Services
of non-dominant carriers are subject to relatively limited regulation by the
FCC. Non-dominant carriers currently are required to file tariffs listing the
rates, terms and conditions of interstate and international services provided by
the carrier. Periodic reports concerning the carrier's interstate circuits and
deployment of network facilities also are required to be filed. The FCC
generally does not exercise direct oversight over cost justification and the
level of charges for services of non-dominant carriers, although it has the
power to do so. Among other requirements pursuant to the Communications Act, the
Company must offer its interstate and international services on a
nondiscriminatory basis, at just and reasonable rates, and remains subject to
FCC complaint and enforcement procedures and private causes of action.

On October 29, 1996, the FCC adopted an order in which it eliminated the
requirement that non-dominant interstate carriers such as the Company maintain
tariffs on file with the FCC for domestic interstate services. The FCC's order
was issued pursuant to authority granted to the FCC in the 1996 Telecom Act to
"forbear" from regulating any telecommunications service provider if the FCC
determines that the public interest will be served. Pursuant to the order,
following a nine-month transition period, relationships between carriers and
their customers were to be set by contract and long distance

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companies were no longer to be required to file with the FCC tariffs for
interstate interexchange services. Carriers also have the option to immediately
cease filing tariffs. The FCC's order, however, has been stayed by a federal
court and carriers must currently continue to file interstate tariffs with the
FCC.

The FCC also imposes prior approval requirements on transfers of control and
assignments of operating authorizations. The FCC has the authority to generally
condition, modify, cancel, terminate or revoke operating authority for failure
to comply with federal laws or the rules, regulations and policies of the FCC.
Fines or other penalties also may be imposed for such violations. There can be
no assurance that the FCC or third parties will not raise issues with regard to
the Company's compliance with applicable laws and regulations. In addition, the
Company is subject to various regulatory fees and assessments, including an
obligation to contribute to the Universal Service Fund.

The FCC, through its proceedings implementing the interconnection provisions
of the 1996 Telecom Act, has ordered the RBOCs and all but one of the other LECs
having in excess of $100 million in gross annual revenue for regulated services
to provide expanded interconnection to LEC central offices to any competitive
access provider, interexchange carrier or end user seeking such interconnection
for the provision of interstate access services. As a result, the Company is
able to reach most business customers in its metropolitan service areas and can
expand its potential customer base. The FCC has imposed mandatory virtual
colocation obligations on the LECs. Virtual colocation is a service in which the
LEC leases or purchases equipment designated by the interconnector and exerts
compete physical control over the equipment, including central office
installation, maintenance and repair. As noted above, the 1996 Telecom Act now
requires most incumbent LECs to offer physical colocation. Subsequent to the
enactment of the 1996 Telecom Act, the FCC has begun a series of expedited
rulemaking proceedings to implement the requirements of the 1996 Telecom Act
concerning interconnection with LEC facilities and other essential terms of the
relationships between competing LECs. On August 8, 1996, the FCC adopted the
Interconnection Decision to implement the interconnection, resale, dialing
parity and numbering administration provisions of the 1996 Telecom Act. Certain
provisions of these rules have been appealed to various U.S. Courts of Appeals.
These appeals have been consolidated into proceedings currently pending before
the U.S. Court of Appeals for the Eighth Circuit. Applications for a stay of the
proposed rules were rejected by the FCC. However, the U.S. Court of Appeals for
the Eighth Circuit has granted a stay of certain provisions of the
Interconnection Decision, including the pricing rules and rules that would have
permitted telecommunications carriers to "pick and choose" among various
provisions of approved interconnection agreements. The FCC applied to the U.S.
Supreme Court to vacate the judicial stay, but the U.S. Supreme Court, on
November 23, 1996, refused to vacate the stay. All other provisions of the
Interconnection Decision remain in effect pending resolution of the consolidated
case on the merits. In a separate proceeding, the FCC implemented the number
portability requirements of the 1996 Telecom Act. These FCC rules are also the
subject of a court appeal.

When ordering interconnection, the FCC granted LECs additional flexibility
in pricing their interstate special and switched access services on a central
office specific basis. Under this pricing scheme, LECs may establish pricing
zones based on access traffic density and charge different prices for central
offices in each zone. Although no assurances are possible, the Company
anticipates that the FCC will grant LECs increasing pricing flexibility as the
number of interconnection agreements and competitors increases. In a concurrent
proceeding, the FCC enacted interim pricing rules that restructure LEC switched
transport rates in order to facilitate competition for switched access.

As a PCS licensee, the Company is subject to regulation by the FCC, and must
comply with certain buildout and other conditions of the license, as well as
with the FCC's regulations governing the PCS service. As a cellular reseller,
the Company is deemed to be a common carrier and is subject to the requirements
of Title II of the Communications Act. In light of the non-dominant market
position of resellers, many of the obligations traditionally imposed on common
carriers are relaxed with respect to resellers. Resellers are required to
contribute to the Telecommunications Relay Services Fund and to

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remit annual regulatory fees to the FCC. Cellular resellers may also be subject
to certain state requirements.

Pursuant to the Communications Act, the FCC has the authority to license the
use of electromagnetic spectrum for radio communication. The Company holds
various FCC licenses for its satellite and microwave transmission facilities
used in its provision of telecommunication services. These licenses generally
have expiration dates and require applications for renewal. Moreover, the
Company may require additional licenses in the future.

FEDERAL REGULATION OF CABLE TELEVISION. The operation of cable television
systems is extensively regulated by federal legislation, FCC regulations and by
Alaska's state government. The discussion below summarizes the 1996 Telecom Act
as it affects the cable television industry and reviews prior federal cable
television regulation as revised by the 1996 Telecom Act.

Rate regulation of the Company's cable television services is divided
between the FCC and the State of Alaska. The FCC's jurisdiction extends to the
CPST, which consists largely of satellite-delivered programming (excluding basic
tier programming and programming offered on a per-channel or per-program basis).
Depending on the regulatory schemes in the relevant states, state and local
franchising authorities ("LFAs"), I.E., in Alaska the APUC, are primarily
responsible for regulating rates for the basic tier of cable services ("BST"),
which will typically contain at least the local broadcast stations and Public
Access, Educational and Government ("PEG") channels. Equipment rates are also
regulated by LFAs. The FCC retains appeal jurisdiction from LFA decisions. Cable
services offered on a per-channel or per-program-only basis generally remain
unregulated.

The 1996 Telecom Act eliminates CPST rate regulation for all cable operators
as of March 31, 1999. In the interim, CPST rate regulation can be triggered only
by an LFA complaint to the FCC. An LFA complaint must be based upon more than
one subscriber complaint. Prior to the 1996 Telecom Act, an FCC review of CPST
rates could be occasioned by a single subscriber complaint to the FCC. The 1996
Telecom Act does not disturb existing or pending CPST rate settlements between
the Company and the FCC. The Company's BST rates remain subject to LFA
regulation under the 1996 Telecom Act, although Juneau is the only system that
is currently subject to rate regulation by the APUC.

Existing law precludes rate regulation wherever a cable operator faces
"effective competition." The 1996 Telecom Act expands the definition of
effective competition to include any franchise area where a local exchange
carrier (or affiliate) provides video programming services to subscribers by any
means other than through direct broadcast satellite. There is no statutory
penetration minimum for the LEC to qualify as an effective competitor, but it
must provide "comparable" programming services (12 channels including some
broadcast channels) in the franchise area.

Under the 1996 Telecom Act, the Company and all other cable operators will
be allowed to aggregate on a franchise system, regional or company level, its
equipment costs into broad categories, such as converter boxes, regardless of
the varying levels of functionality of the equipment within each such broad
category. The 1996 Telecom Act will allow the Company to average together costs
of different types of converters (including non-addressable, addressable, and
digital). The statutory changes will also facilitate the rationalizing of
equipment rates across jurisdictional boundaries. These cost-aggregation rules
do not apply to the limited equipment used by "BST-only" subscribers.

The 1996 Telecom Act immediately relaxes the "uniform rate" requirements of
the 1992 Cable Act (which required a cable operator to charge uniform rates
throughout its franchise areas) by specifying that such requirements do not
apply where the operator faces "effective competition," and by exempting bulk
discounts to multiple dwelling units, although complaints about "predatory"
pricing may be made to the FCC. Upon a prima facie showing that there are
reasonable grounds to believe that the discounted price is predatory, the cable
system operator will have the burden of proving otherwise.

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Under the 1996 Telecom Act, investor-owned utilities must make poles and
conduits available to cable systems under delineated terms. Electric utilities
are given the right to deny access to particular poles on a nondiscriminatory
basis for lack of capacity, safety, reliability, and generally accepted
engineering purposes. The current method for determining rates charged by
telephone and utility companies for cable delivery of cable and non-cable
services will continue for five years. However, the FCC will establish a new
formula for poles used by cable operators for telecommunications services which
will result in higher pole rental rates for cable operators. Any increases
pursuant to this formula may not be made for five years and will be phased in
equal increments over years five though ten. This new FCC formula does not apply
in states which regulate pole rents. Pole owners must impute pole rentals to
themselves if they offer telecommunications or cable services. Cable operators
need not pay future "make-ready" on poles currently contracted if the make-ready
is required to accommodate the attachments of another user, including the pole
owner. The Company is still negotiating to obtain the consent to the assignment
of certain pole attachment agreements to the Company by the sellers of the Cable
Systems. However, the Company has been permitted to continue to use necessary
poles in the operation of the Cable Systems.

The 1996 Telecom Act declares that no state or local law or regulation may
prohibit or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are authorized to
impose "competitively neutral" requirements regarding universal service, public
safety and welfare, service quality, and consumer protection. The 1996 Telecom
Act further provides that cable operators and affiliates providing
telecommunications services are not required to obtain a separate franchise from
LFAs for such services. The 1996 Telecom Act prohibits LFAs from requiring cable
operators to provide telecommunications service or facilities as a condition of
a grant of a franchise, franchise renewal, or franchise transfer, except that
LFAs can seek "institutional networks" as part of such franchise negotiations.

The 1996 Telecom Act allows telephone companies to compete directly with
cable operators by repealing the telephone company-cable cross-ownership ban and
the FCC's video dialtone regulations. This will allow LECs, including the RBOCs,
to compete with cable operators both inside and outside their telephone service
areas, with certain regulatory safeguards. If a LEC provides video via radio
waves, it is subject to broadcast jurisdiction. If a LEC provides common carrier
channel service it is subject to common carrier jurisdiction. A LEC providing
video programming to subscribers is otherwise regulated as a cable operator
(including franchising, leased access, and customer service requirements),
unless the LEC elects to provide its programming via an "open video system." LEC
owned programming services will also be fully subject to program access
requirements.

The 1996 Telecom Act replaces the FCC's video dialtone rules with an "open
video system" ("OVS") plan by which LECs can provide cable service in their
telephone service area. LECs complying with the FCC OVS regulations will receive
relaxed oversight. The 1996 Telecom Act requires the FCC to act on any OVS
certification within ten days of its filing. Only the program access, negative
option billing prohibition, subscriber privacy, Equal Employment Opportunity
("EEO"), PEG, must-carry and retransmission consent provisions of the
Communications Act will apply to LECs providing OVS. Franchising, rate
regulation, customer service provisions, leased access and equipment
compatibility rules will not apply. Cable copyright provisions will apply to
programmers using OVS. LFAs may require OVS operators to pay "franchise fees"
only to the extent that the OVS provider or its affiliates provide cable
services over the OVS. Such fees may not exceed the franchise fees charged to
cable operators in the area, and the OVS provider may pass through the fees as a
separate subscriber bill item. OVS operators will be subject to LFA general
right-of-way management regulations.

The 1996 Telecom Act requires the FCC to adopt, within six months,
regulations prohibiting an OVS operator from discriminating among programmers,
and ensuring that OVS rates, terms, and conditions for service are reasonable
and nondiscriminatory. Further, the FCC is to adopt regulations prohibiting a
LEC-OVS operator, or its affiliates, from occupying more than one-third of the
system's activated

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channels when demand for channels exceeds supply, although there are not numeric
limits. The 1996 Telecom Act also mandates OVS regulations governing channel
sharing, extending the FCC's sports exclusivity, network nonduplication, and
syndex regulations, and controlling the positioning of programmers on menus and
program guides. The FCC has issued open video system regulations. The 1996
Telecom Act does not require LECs to use separate subsidiaries to provide
incidental interLATA video or audio programming services to subscribers or for
their own programming ventures.

While there remains a general prohibition on LEC buyouts of cable systems
(any ownership interest exceeding 10%) within a LEC's telephone service area,
cable operator buyouts of LEC systems within a cable operator's service area,
and joint ventures between cable operators and LECs in the same market, the 1996
Telecom Act provides some exceptions. A rural exemption permits buyouts where
the purchased system serves an area with fewer than 35,000 inhabitants outside
an urban area. Where a LEC purchases a cable system, that system plus any other
system in which the LEC has an interest may not serve 10% or more of the LEC's
telephone service area. Additional exceptions are also provided for such
buyouts. The 1996 Telecom Act also provides the FCC with the power to grant
waivers of the buyout provisions in cases where (i) the cable operator or LEC
would be subject to undue economic distress, (ii) the system or facilities would
not be economically viable, or (iii) the anticompetitive effects of the proposed
transaction are clearly outweighed by the effect of the transaction in meeting
community needs. The LFA must approve any such waiver.

The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries known as "exempt
telecommunications companies" and must apply to the FCC for operating authority.
It is anticipated that large utility holding companies may become significant
competitors to both cable television and other telecommunications providers.
Several such utilities have been granted broad authority by the FCC to engage in
activities which could include the provision of video programming.

The 1996 Telecom Act eliminates broadcast/cable cross-ownership restrictions
(including the broadcast network/cable restriction), but leaves in place FCC
regulations prohibiting local cross-ownership between television stations and
cable systems. The FCC is empowered by the 1996 Telecom Act to adopt rules to
ensure carriage, channel positioning and nondiscriminatory treatment of
non-affiliated broadcast stations by cable systems affiliated with a broadcast
network. The SMATV and MMDS cable cross-ownership restrictions have been
eliminated for cable operators subject to effective competition.

The 1996 Telecom Act preserves must carry rights (which are described in
greater detail below) for local television broadcasters, and clarifies that the
geographic scope of must carry is to be based on commercial publications which
delineate television markets based on viewing patterns. The FCC is directed to
grant or deny must carry requests within 120 days of a complaint being filed
with the FCC.

The 1996 Telecom Act directs an FCC equipment comparability rulemaking
emphasizing that (i) narrow technical standards, mandating a minimum degree of
common design among televisions, VCRs, and cable systems, and relying heavily on
the open marketplace, should be pursued; (ii) competition for all converter
features unrelated to security descrambling should be maximized; and (iii)
adopted standards should not affect unrelated telephone and computer features.
The 1996 Telecom Act directs the FCC to adopt regulations which assure the
competitive availability of converters ("navigation devices") from vendors other
than cable operators. The 1996 Telecom Act provides that the FCC's rules may not
impinge upon signal security concerns of theft of service protections. Waivers
will be possible where the cable operator shows the waiver is necessary for the
introduction of new services. Once the equipment market becomes competitive, FCC
regulations in this area will be terminated.

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The 1996 Telecom Act requires cable operators, upon subscriber request, to
fully scramble or block at no charge the audio and video portion of any channel
not specifically subscribed to by a household. Further, the 1996 Telecom Act
provides that sexually explicit programming must be fully scrambled or blocked.
If the cable operator cannot fully scramble or block its signal, it must
restrict transmission to those hours of the day when children are unlikely to
view the programming. On March 24, 1997, the United States Supreme Court let
stand a lower court ruling that allows enforcement of this provision pending a
constitutional challenge. In response to this ruling, the FCC declared that its
rules implementing the scrambling provision would become effective on May 18,
1997. The scrambling provision may increase operating expenses for cable
television system operators, including the Company, and provide a competitive
advantage to less regulated providers of video programming services.

The 1984 Cable Act regulated to some degree and the 1992 Cable Act more
extensively regulated the cable television industry and the vast majority of
that regulation remains unchanged by the 1996 Telecom Act. Among other things,
the 1984 Cable Act (i) requires cable television systems with 36 or more
"activated" channels to reserve a percentage of such channels for commercial use
by unaffiliated third parties; (ii) permits franchise authorities to require the
cable operator to provide channel capacity, equipment and facilities for public
educational and governmental access; and (iii) regulates the renewal of
franchises.

The 1992 Cable Act greatly expanded federal and local regulation of the
cable television industry. The Company believes that the 1992 Cable Act taken as
a whole has had and will continue to have a material adverse impact upon the
cable industry in general and upon the Company's cable operations specifically.
See related discussion under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Certain of the more
significant areas of regulation imposed by the 1992 Cable Act are discussed
below.

The 1992 Cable Act directed the FCC to promulgate regulations regarding the
sale and acquisition of cable programming between multichannel video program
distributors (including cable operators) and programming services in which a
cable operator has an attributable interest. The legislation and the
implementation regulations adopted by the FCC preclude most exclusive
programming contracts (unless the FCC first determines the contract serves the
public interest) and generally prohibit a cable operator which has an
attributable interest in a programmer from improperly influencing the terms and
conditions of sale to unaffiliated multichannel video program distributors.
Further, the 1992 Cable Act requires that such cable affiliated programmers make
their programming services available to cable operators and competing video
technologies such as MMDS and DBS, and to telephone company providers of video
services, on terms and conditions that do not unfairly discriminate among such
competitors.

Under the 1992 Cable Act, the FCC adopted regulations prohibiting cable
operators from requiring a financial interest in a program service as a
condition to carriage of such service, coercing exclusive rights in a
programming service or favoring affiliated programmers so as to restrain
unreasonably the ability of unaffiliated programmers to compete.

The 1992 Cable Act subjected all cable systems, including the Cable Systems,
to rate regulation, except in those cases where they face "effective
competition." The FCC was required to establish standards and procedures
governing regulation of rates for basic cable service, equipment and
installation, which were then to be implemented by the pertinent state and local
franchising authorities. The 1992 Cable Act also required the FCC, upon
complaint from a franchising authority or a cable subscriber, to review the
"reasonableness" of rates for CPSTs. The 1996 Telecom Act circumscribed the
review of CPST rates of the Cable Systems by amending the 1992 Cable Act to
allow only LFAs to file complaints. Complaints by subscribers of the Cable
Systems regarding CPST rates were filed with and accepted by the FCC for certain
franchise areas. However, filings were made in response to those complaints
relating to the period prior to July 15, 1994, and the disputed rates were
approved by the FCC. Potential liability

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for CPST rate refunds for the Cable Systems is limited to the period after July
15, 1994. Services offered on an individual basis, such as pay television and
pay-per-view services, are not generally subject to rate regulation.

On April 1, 1993, the FCC adopted rate regulations governing virtually all
cable systems. Such regulations were revised on February 22, 1994. Under such
regulations, existing basic and tier service rates typically are evaluated
against "benchmark" rates established by the FCC and are subject to mandatory
reductions. Equipment and installation charges are regulated based on "actual
costs." As noted above, the 1996 Telecom Act provides that rate regulation of
the CPST automatically sunsets on March 31, 1999.

The FCC also allowed cable operators to justify rates under "cost of
service" rules, which allow "high cost" systems to establish rates in excess of
the benchmark level. The FCC's interim cost of service rules allowed a cable
operator to recover through rates for regulated cable services its normal
operating expenses plus a rate of return equal to 11.25 percent on the rate
base. However, the FCC significantly limited the inclusion in the rate base of
acquisition costs in excess of the book value of tangible assets. As a result,
the Company's predecessors with respect to the Cable Systems pursued cost of
service justifications in only a few cases. On December 15, 1995, the FCC
adopted slightly more favorable cost of service rules.

The FCC's rate regulations generally permit cable operators to adjust rates
to account for inflation and increases in certain external costs, including
programming costs, to the extent such increases exceed the rate of inflation.
However, a cable operator may pass through increases in the cost of programming
services affiliated with such cable operator to the extent such costs exceed the
rate of inflation only if the price charged by the programmer to the affiliated
cable operator reflects either prevailing prices offered in the marketplace by
the programmer to unaffiliated third parties or the fair market value of the
programming. The FCC's revised regulations confirm that increases in pole
attachment fees ordinarily will not be accorded external cost treatment. The FCC
recently adopted a method for recovering external costs and inflation on an
annual basis. The new method minimizes the need for frequent rate adjustments
and the regulatory lag problems associated with the previous rate adjustment
methodology.

The regulations also provide mechanisms for adjusting rates when regulated
tiers are affected by channel additions or deletions. Additional programming
costs resulting from channel additions can be accorded the same external
treatment as other program costs increases, and cable operators presently are
permitted to recover a mark-up on their programming expenses. Under one option,
operators were allowed a flat ($.20) fee increase per channel added to an
existing CPST, with an aggregate cap of such increases ($1.20) plus a license
fee reserve ($.30) through 1996. In 1997, an additional flat ($.20) fee increase
is available, and the license fees for additional channels and for increases in
existing channels are no longer be subject to the aggregate cap. This optional
approach for adding services is scheduled to expire on December 31, 1997.

The FCC adopted additional rules that permit channels of new programming
services to be added to cable systems in a separate new product tier which the
FCC has determined will not be rate regulated at this time. The FCC has also
adopted rules allowing operators to raise rates based on costs incurred in
connection with a substantial upgrade of the cable system.

From time to time the Company evaluates its rates in light of market
conditions. Past rate changes have not had a material adverse effect on the
operating income of the Cable Systems and the changes currently being
contemplated are not expected to have such an effect. Certain rate actions
previously taken by the Cable Systems are subject to modification or
reconsideration during the course of ongoing proceedings before the FCC.

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As required by the 1992 Cable Act, the FCC has adopted comprehensive
regulations establishing minimum standards for customer service and technical
system performance. Franchising authorities are allowed to enforce customer
service requirements that are more strict than the FCC standards.

The 1992 Cable Act granted broadcasters a choice of "must carry" rights or
"retransmission consent" rights. By October of 1993 and every three years
thereafter, cable operations were required to secure permission from
broadcasters that elected retransmission consent rights before retransmitting
the broadcasters' signals. Local and distant broadcasters can require cable
operators to make a payment as a condition to carriage of such broadcasters'
station on a cable system. Established "superstations" were not granted such
rights.

The 1992 Cable Act also imposed obligations to carry "local" broadcast
stations for such stations which chose a "must carry" right, as distinguished
from the "retransmission consent" right described above. The rules adopted by
the FCC generally provided for mandatory carriage by cable systems of all local
full-power commercial television broadcast signals selecting must carry,
including the signals of stations carrying home-shopping programming and,
depending on a cable system's channel capacity, non-commercial television
broadcast signals. The United States Supreme Court recently upheld the must
carry regulations on constitutional grounds.

The 1992 Cable Act required the FCC to (i) promulgate rules and regulations
establishing reasonable limits on the number of cable subscribers which may be
served by a single multiple system cable operator or entities in which it has an
attributable interest, (ii) prescribe rules and regulations establishing
reasonable limits on the number of channels on a cable system that will be
allowed to carry programming in which the owner of such cable system has an
attributable interest, and (iii) consider the necessity and appropriateness of
imposing limitations on the degree to which multichannel video programming
distributors (including cable operators) may engage in the creation or
production of video programming.

Under the 1992 Cable Act and the FCC's regulations, a cable operator may not
hold a license for a MMDS system within the same geographic area in which it
provides cable service. The 1996 Telecom Act allows such ownership if effective
competition exists in that geographic area.

The 1992 Cable Act anti-buy-through rules require cable systems to permit
subscribers to purchase video programming offered by the operator on a per
channel or a per program basis without the necessity of subscribing to any tier
of service, other than the basic cable service tier, unless the system's lack of
addressable converter boxes or other technological limitations does not permit
it to do so. The statutory exemption for cable systems that do not have the
technological capability to offer programming in the manner required by the
statute is available until a system obtains such capability, but not later than
December 2002. The FCC may waive such time periods, if deemed necessary. The
majority of the Company's subscribers are served by systems that have the
technological capability to comply with the anti-buy-through rules. The
contemplated upgrades of the Company's systems will enable all of the Cable
Systems to comply with such rules by 2002.

The 1996 Telecom Act and the 1992 Cable Act contain numerous other
provisions which, together with the 1984 Cable Act, create a comprehensive
regulatory framework. Violation by a cable operator of the statutory provisions
or the rules and regulations of the FCC can subject the operator to substantial
monetary penalties and other significant sanctions such as suspension of
licenses and authorizations, issuance of cease and desist orders, and imposition
of penalties that could be of severe consequence to the conduct of a cable
operator's business. Many of the specific obligations imposed on the operation
of cable television systems under these laws and regulations are complex and
burdensome and increase the Company's cost of doing business.

In the normal course of its business, the Company obtains licenses from the
FCC for two-way communications stations, and, in certain cases, microwave relay
stations and other facilities used in its

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cable television operation. Based upon its experience with and knowledge of the
renewal process, the Company has no reason to believe that such licenses will
not be renewed as they expire.

Pursuant to lease agreements with local public utilities, the cable
facilities in the Company's Cable Systems are generally attached to utility
poles or are in underground ducts controlled by the utility owners. The rates
and conditions imposed on the Company for such attachments or occupation of
utility space are generally subject to regulation by the FCC or, in some
instances, by state agencies, and are subject to change. As described above, the
1996 Telecom Act significantly revises the regulation of pole attachment rates
and access.

STATE REGULATION OF TELEPHONY AND CABLE. The State of Alaska has the
authority to regulate telecommunications services that originate and terminate
within the State, and it exercises that authority through the APUC. In 1990 the
Alaskan legislature introduced intrastate competition in Alaska, and the Company
through its subsidiary, GCI Communication Corp., began providing long distance
intrastate telecommunications services on May 15, 1991, on its own facilities in
the areas where it provided interstate service and through resale of others'
services where it had no facilities. The APUC developed regulations that allow
for the certification of additional carriers for such intrastate
telecommunications services and, to varying degrees, require filing of tariffs
and regulation of the rates for such services. Under the APUC's current policy
and regulations, all certified carriers are required to file tariffs for the
provision of intrastate services. When filing for a rate increase, the dominant
carrier is required to file an accompanying rate case. Non-dominant carriers
such as the Company are not rate regulated. Tariff revisions filed by
non-dominant carriers routinely become effective without intervention by the
APUC or third parties. Tariffs can be filed or revised on 30 days notice. The
APUC currently restricts the provision of facilities-based interexchange service
in certain thinly populated areas. The Company has obtained a limited waiver of
this rule to allow deployment of its DAMA facilities in 56 sites in rural Alaska
and has filed a petition with the APUC to preempt the rule under the 1996
Telecom Act.

In 1992, GCI Communication Corp. obtained a Certificate of Public
Convenience and Necessity from the APUC pursuant to which it provides telephone
relay services ("TRS") for the deaf, hard-of-hearing and speech impaired through
the Company's operator service center in Wasilla, Alaska. Intrastate TRS
operating costs, capital costs and a rate of return are being funded through a
universal access surcharge billed by all local telephone companies in Alaska.
Under an FCC decision, commencing in 1993, a portion of the TRS operating costs
have been recovered through an interstate pool administered by the National
Exchange Carrier Association.

The Company received approval from the APUC in February 1997 to provide
local exchange service in Anchorage and Hope, Alaska. As an authorized local
exchange service provider in parts of Alaska, the Company is regulated as a LEC
by the APUC. The APUC's February 1997 Order requires the Company to comply with
several regulatory requirements, including the filing of a local exchange
service tariff and the filing of certain annual and quarterly reports. The
Company intends to file an application with the APUC requesting approval for
provision of local exchange services in Fairbanks, Juneau and other areas of
Alaska. The Company intends to offer local services through its own facilities
or resale of LEC facilities.

As a PCS licensee, the Company is subject to limited regulatory oversight by
the APUC (E.G., in the areas of consumer protection and transfer of its
licenses), although states are not permitted to regulate the rates of PCS and
other commercial mobile service providers. PCS licensees may also be subject to
regulatory requirements of local jurisdictions pertaining to, among other
things, the selling of tower facilities.

Cable television systems generally are constructed and operated under the
authority of nonexclusive certificates, permits or "franchises" granted by local
or, as in Alaska, state governmental authorities. The Company's franchises
consist of 15 certificates of public convenience issued by the APUC for the
Cable Systems and several military franchise agreements required to provide
cable service on military bases. Operation of the Cable Systems also requires
several FCC radio-band frequency licenses.

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Federal law limits the power of the franchising authorities to impose
obligations on cable television operators as a condition of the granting or
renewal of a franchise. Franchises contain varying provisions relating to
construction and operation of cable television systems, such as time limitations
on commencement or completion of construction; quality of service, including (in
certain circumstances) requirements as to the number of channels and broad
categories of programming offered to subscribers; rate regulation; provision of
service to certain institutions; provision of channels for public access and
commercial leased-use; and maintenance of insurance and indemnity bonds.
Franchises usually require the consent of the franchising authority prior to a
transfer of the franchise or a transfer or change in ownership or operating
control of the franchisee.

Subject to applicable law, a cable television franchise may be terminated
prior to its expiration date if the operator fails to comply with the material
terms and conditions of the franchise. Under the 1984 Cable Act, if a franchise
is lawfully terminated, and if the franchising authority acquires ownership of
the cable television system or effects a transfer of ownership to a third party,
such acquisition or transfer must be at an equitable price or, in the case of a
franchise existing on the effective date of the 1984 Cable Act, at a price
determined in accordance with the terms of the franchise, if any.

The 1984 Cable Act, as supplemented by the renewal provisions of the 1992
Cable Act, establishes an orderly process for franchise renewal which protects
cable operators against unfair denials of renewals when the operator's past
performance and proposal for future performance meet the standards established
by the 1984 Cable Act. These provisions are not generally relevant in Alaska
where the certificates of public convenience granted by the APUC to operate
cable systems are perpetual in duration, subject to revocation for cause.
Franchises issued by the U.S. government to provide cable television service on
military bases are subject to the renewal provisions of the 1992 Cable Act.

In order for the APUC to exercise rate regulation authority over a cable
system's basic service rates, 25% of a cable system's subscribers must request
such regulation by filing a petition with the APUC. In July 1990, the APUC
instituted rate regulation over the Company's Juneau operations pertaining to
basic cable service and installation. The State of Alaska does not currently
exercise rate regulation authority over the Company's other Cable Systems.
Therefore, as of March 31, 1997, there was no refund liability for basic service
at those other locations. Since rate regulation over the Company's Juneau
operations began in 1990 and through March 31, 1997, no refund liability has
existed for this location. Refund liability for cable programming service rates
may be calculated from the date a complaint alleging an unreasonable rate for
cable programming service is filed with the FCC until the rate reduction is
implemented.

EMPLOYEES

As of April 30, 1997, the Company employed a total of 796 full-time
employees and 22 part-time employees, including employees involved with the
operation of the Cable Systems. The Company believes that its future success
will depend upon its continued ability to attract and retain highly skilled and
qualified employees. The Company believes that its relations with its employees
are satisfactory.

LEGAL PROCEEDINGS

Except as set forth in this section, the Company is not a party to or
subject to, and none of its properties are subject to, any material pending
legal proceedings. The Company is a party to various claims and pending
litigation as part of the normal course of its business. The Company is also
involved in several administrative proceedings (including informal complaint
proceedings) and filings with the FCC and state regulatory authorities. In the
opinion of management, the nature and disposition of these matters are
considered routine and arise in the ordinary course of business. Management
believes that, even if these matters were to be resolved unfavorably to the
Company, they would not have a materially adverse effect on the Company's
financial condition or results of operations.

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On May 20, 1997, the Company filed an action requesting preliminary and
permanent injunctive relief against ATU in the U.S. District Court at Anchorage.
The suit seeks immediate implementation of transitional local number
portability. The Company believes that the obligation on the part of ATU to
provide number portability is explicit in Section 251(b)(2) of the 1996 Telecom
Act, and the method for implementation is contained in the interconnection
agreement between the parties. The Company alleged that ATU repudiated its
obligation to immediately implement local number portability, citing the need
for additional regulatory adjudication on an ancillary issue. The Company
contends that the technical solutions for implementing local number portability
and interconnections are currently in place and have been tested, and the suit
seeks immediate implementation. No damages are sought.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information about each of Parent's
and the Issuer's directors and executive officers as of May 15, 1997.

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- --- ------------------------------------------------------------------------------
<S> <C> <C>
Carter F. Page(1)(2) 65 Chairman and Director of Parent

Ronald A. Duncan(1) 44 President, Chief Executive Officer and Director of Parent;
President and Director of Issuer

Robert M. Walp(1) 69 Vice Chairman and Director of Parent

John M. Lowber(2) 47 Senior Vice President, Chief Financial Officer, Secretary and Treasurer of
Parent; Chief Financial Officer, Secretary, Treasurer and Director of Issuer

G. Wilson Hughes 51 Executive Vice President and General Manager of Parent;
Director of Issuer

William C. Behnke 39 Senior Vice President-Marketing and Sales of Parent

Richard P. Dowling 53 Senior Vice President-Corporate Development of Parent;
Vice President of Issuer

Dana L. Tindall 35 Senior Vice President-Regulatory Affairs of Parent

Donne F. Fisher(1)(2) 58 Director of Parent

Jeffery C. Garvey(1) 48 Director of Parent

John W. Gerdelman(1) 44 Director of Parent

William P. Glasgow(1) 38 Director of Parent

Donald Lynch(1) 49 Director of Parent

Larry E. Romrell(1) 57 Director of Parent

James M. Schneider(1) 44 Director of Parent
</TABLE>

- ------------------------

(1) Member of Audit Committee and Compensation Committee of Parent.

(2) Member of Finance Committee of Parent.

CARTER F. PAGE. Mr. Page has served as Chairman and a director of Parent
since 1980. His term as director of Parent expires in 1999. From December 1987
to December 1989, he served as a consultant to WestMarc in matters related to
the Company. Mr. Page served as President and director of WestMarc from 1972 to
December 1987. Since then and to the present, he has been managing general
partner of Semaphore Partners, a general partnership and investment vehicle in
the communications industry.

RONALD A. DUNCAN. Mr. Duncan is a co-founder of Parent and has been a
director of Parent since 1979. His term as director of Parent expires in 1997.
Mr. Duncan is his own nominee to the Board pursuant to the Voting Agreement. Mr.
Duncan has served as President and Chief Executive Officer of Parent since
January 1, 1989. From 1979 through December 1988 he was the Executive Vice
President of Parent. Mr. Duncan is also the President and a director of the
Issuer. His term as director of the Issuer expires in 1998.

ROBERT M. WALP. Mr. Walp is a co-founder of Parent. He has been a director
of Parent since 1979, has served as Vice Chairman of Parent since January 1,
1989 and is also an employee of Parent. Mr. Walp is his own nominee to the Board
pursuant to the Voting Agreement. His term as director of

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Parent expires in 1999. From 1979 through 1988, Mr. Walp served as President and
Chief Executive Officer of Parent.

JOHN M. LOWBER. Mr. Lowber has served as Chief Financial Officer of Parent
since January 1987, as Secretary and Treasurer since July 1988 and as Senior
Vice President-Administration since December 1989. Mr. Lowber was Vice
President-Administration of Parent from 1985 to December 1989. Prior to joining
Parent, Mr. Lowber was a senior manager at KPMG Peat Marwick. Mr. Lowber is also
the Chief Financial Officer, Secretary and Treasurer and a director of the
Issuer. His term as director of the Issuer expires in 1998.

G. WILSON HUGHES. Mr. Hughes has served as Executive Vice President and
General Manager of Parent since June 1991. Mr. Hughes was President and a member
of the board of directors of Northern Air Cargo, Inc. from March 1989 to June
1991. From June 1984 to December 1988 he was President and a member of the board
of directors of Enserch Alaska Services, Inc. Mr. Hughes is also a director of
the Issuer, and his term as such expires in 1998.

WILLIAM C. BEHNKE. Mr. Behnke has served as Senior Vice President-Marketing
and Sales of Parent since January 1994. Mr. Behnke was Vice President of Parent
and President of GCI Network Systems, Inc., a former subsidiary of Parent, from
February 1992 to January 1994. From June 1989 to February 1992 he was Vice
President of Parent and General Manager of GCI Network Systems, Inc. From August
1984 to June 1989 Mr. Behnke was Senior Vice President of TransAlaska Data
Systems, Inc.

RICHARD P. DOWLING. Mr. Dowling has served as Senior Vice
President-Corporate Development of Parent since December 1990. Mr. Dowling was
Senior Vice President-Operations and Engineering of Parent from December 1989 to
December 1990. From 1981 to December 1989 he served as Vice President-Operations
and Engineering of Parent. Mr. Dowling is also Vice President of the Issuer.

DANA L. TINDALL. Ms. Tindall has served as Senior Vice President-Regulatory
Affairs since January 1994. Ms. Tindall was Vice President-Regulatory Affairs of
Parent from January 1991 to January 1994. From October 1989 through December
1990, Ms. Tindall was Director of Regulatory Affairs of Parent and she served as
Manager of Regulatory Affairs of Parent from 1985 to October 1989. In addition,
Ms. Tindall was an adjunct professor of Telecommunications Economics at Alaska
Pacific University from September through December 1995.

DONNE F. FISHER. Mr. Fisher has served as a director of Parent since 1980
and is one of TCI's nominees to the Board pursuant to the Voting Agreement. His
term as director of Parent expires in 1998. Mr. Fisher has been a consultant to
TCI since January 1996 and a director of TCI since 1980. From 1982 until 1996,
he held various executive officer positions with TCI and its subsidiaries. Mr.
Fisher serves on the boards of directors of most of TCI's subsidiaries and the
boards of directors of DMX, Inc. and United Video Satellite Group, Inc. Mr.
Fisher also acts as executor of the Estate of Bob Magness, one of the Company's
principal shareholders.

JEFFERY C. GARVEY. Mr. Garvey has served as a director of Parent since his
appointment by the Board in December 1996 to fill a new seat created in the
expansion of the Board from seven to ten members and is one of the Voting Prime
Sellers' nominees to the Board pursuant to the Voting Agreement. His term as
director of Parent expires in 1997. Since June 1989, Mr. Garvey has been General
Partner of Austin Ventures, L.P., a shareholder of Alaska Cable, Inc. (one of
the entities merged into a subsidiary of the Company as a part of the
acquisition of the Cable Systems). Mr. Garvey joined Austin Ventures in 1979,
and prior to that he was Senior Vice President in charge of the National and
Specialized Lending Divisions of PNC Bank (formerly Provident National Bank) in
Philadelphia, Pennsylvania. From 1971 to 1976 he held several positions with
Pittsburgh National Bank focusing on broadcast communications.

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JOHN W. GERDELMAN. Mr. Gerdelman has served as a director of Parent since
July 1994 and is one of MCI's nominees to the Board pursuant to the Voting
Agreement. His term as director of Parent expires in 1999. Mr. Gerdelman has
been President, Network Services, of MCI, a wholly owned subsidiary of MCI
Communications Corporation, since September 1994. He was Senior Vice President
of MCI from July 1992 to September 1994. From July 1989 to July 1992 Mr.
Gerdelman was President of MCI Services, Inc., a subsidiary of MCI.

WILLIAM P. GLASGOW. Mr. Glasgow has served as a director of Parent since
his appointment by the Board in December 1996 to fill a new seat created in the
expansion of the Board from seven to ten members and is one of the Voting Prime
Sellers' nominees to the Board pursuant to the Voting Agreement. His term as
director of Parent expires in 1998. Mr. Glasgow has been President of Prime II
Management, Inc., a Delaware corporation, and sole general partner of Prime
Management since July 1996. Mr. Glasgow was President of Prime Cable Fund I,
Inc., a Delaware corporation and the sole general partner of Prime from July
1996 to the merger of the corporation with a subsidiary of the Company as a part
of the acquisition of the Cable Systems. Prior to that he was Senior Vice
President-Finance of both corporations from September 1991 and Vice
President-Finance of Prime Cable Fund I, Inc. from February 1989 to September
1991. Mr. Glasgow joined Prime Cable Corp. (an affiliate of Prime II Management,
Inc.) in 1983 and served in various capacities until that corporation was
liquidated in 1987.

DONALD LYNCH. Mr. Lynch has served as a director of Parent since his
appointment by the Board in December 1996 to fill a new seat created in the
expansion of the Board from seven to ten members and is one of MCI's nominees to
the Board pursuant to the Voting Agreement. His term as director of Parent
expires in 1997. Mr. Lynch is a Senior Vice President of MCI and has been with
MCI for over 15 years in various executive positions.

LARRY E. ROMRELL. Mr. Romrell has served as a director of Parent since 1980
and is one of TCI's nominees to the Board pursuant to the Voting Agreement. His
term as director of Parent expires in 1997. Since 1994, Mr. Romrell has been an
Executive Vice President of TCI and the President and a director of TCI
Technology Ventures, Inc. From 1991 to 1994, Mr. Romrell was a Senior Vice
President of TCI. Mr. Romrell is also a director of Teleport Communications
Group, Inc. and of United Video Satellite Group. He serves on the compensation
committee of United Video Satellite Group.

JAMES M. SCHNEIDER. Mr. Schneider has served as a director of Parent since
July 1994. His term as director of Parent expires in 1998. Mr. Schneider has
been the Vice President Finance for Dell Computer Corporation since September
1996. Prior to that he was Senior Vice President Finance for MCI Communications
Corporation in Washington, D.C. since September 1993. Mr. Schneider was with the
accounting firm of Price Waterhouse from 1973 to September 1993 and was a
partner in that firm from October 1983 to September 1993.

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

Parent's Board currently consists of ten directors, divided into three
classes of directors serving staggered three-year terms. The Issuer's board of
directors currently consists of three directors. Directors of Parent and Issuer
are elected at their respective annual meetings of shareholders and serve until
they resign or are removed or until their successors are elected and qualified.
Executive officers of Parent and the Issuer generally are appointed at their
respective boards of directors first meetings after each annual meeting of
shareholders and serve at the discretion of the Board.

VOTING AGREEMENT

Eight of the ten directors of Parent are nominated by certain shareholders
(the "Voting Shareholders") of the Company who are party to the Voting Agreement
that was entered into on October 31, 1996,

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in connection with the Company's acquisition of Prime. Pursuant to the Voting
Agreement, each Voting Shareholder will vote its stock and take all actions
within its power to maintain the size of the Board at eight or more directors
and to cause to be elected to the Board (i) two directors nominated by MCI; (ii)
one director nominated by Mr. Duncan; (iii) one director nominated by Mr. Walp;
(iv) two directors nominated by TCI; and (v) two directors nominated by the
Voting Prime Sellers, for so long as (1) the Voting Prime Sellers (and their
distributees who agree in writing to be bound by the terms of the Voting
Agreement) collectively own at least 10% of the then issued and outstanding
shares of Class A Common Stock and (2) the Prime Management Agreement is in full
force and effect; however, if only one of these two conditions is met, the
Voting Prime Sellers are entitled to nominate only one director, and if neither
of these conditions is met, the Voting Prime Sellers are not entitled to
nominate any directors. The obligation of the Voting Shareholders to vote for
the Voting Prime Sellers' nominees and maintain the Board at eight or more
directors exists for so long as the Voting Prime Sellers collectively own 10% of
the issued and then-outstanding shares of Class A Common Stock or so long as the
Prime Management Agreement is in effect. The Voting Agreement states that the
shares subject to it are also to be voted on other matters to which the parties
unanimously agree, but, as of the date of this Prospectus, no other matters are
subject to the Voting Agreement.

If any Voting Shareholder (other than the Voting Prime Sellers) disposes of
more than 25% of the votes represented by its holdings of the Common Stock of
Parent, such Voting Shareholder will cease to be subject to the Voting Agreement
and such disposition triggers on behalf of each other Voting Shareholder the
right to withdraw from the Voting Agreement. Unless earlier terminated, the
Voting Agreement will continue until the earlier of completion of the annual
shareholder meeting of the Company in June 2001 or until there is only one party
to the Voting Agreement.

TCI expects to sell all of its shares of Parent's Common Stock in the Stock
Offering. If TCI does so, it will no longer be subject to the Voting Agreement
and each other party to the agreement will have the right to withdraw from the
Voting Agreement by giving written notice to the other parties. The Company
currently expects that TCI's nominees to the Board will continue as directors of
Parent and that the other parties will not terminate their rights and
obligations under the Voting Agreement.

COMMITTEES OF THE BOARD

The Board currently has three Committees: the Audit Committee, the
Compensation Committee, and the Finance Committee. The Audit Committee is
composed of all members of the Board. The Audit Committee's duties include (i)
making recommendations to the Board on conducting the annual audit of the
Company and its subsidiaries, including the selection of an external auditor to
conduct the annual audit and such other audits or accounting reviews of those
entities as the Audit Committee deems necessary, (ii) reviewing the plan or
scope of an audit or review and the results of such audit or review, and (iii)
carrying out other duties as delegated in writing by the Board.

The Compensation Committee is composed of all members of the Board. The
Compensation Committee establishes compensation policies regarding executive
officers and directors and makes recommendations to the Board regarding such
compensation, including establishing an overall cap on executive compensation
and setting performance standards for executive officer compensation.

The Finance Committee is composed of Messrs. Fisher, Page and Lowber. Its
duties are to review Company finance matters from time to time and provide
guidance to the Chief Financial Officer regarding these matters.

DIRECTOR COMPENSATION

In December 1996, each person who was then a director of the Company (other
than the MCI representatives) received $2,000 in director fees for the period
from July 1996 to June 1997. It is MCI's policy that its directors not accept
remuneration for serving on a board of directors other than those of

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MCI and its subsidiaries. The non-MCI directors who joined the Company in
December will receive a prorated fee for the July 1996 to July 1997 period.
During the year ended December 31, 1996, the directors on the Board received no
other direct compensation for serving on the Board, but were reimbursed for
travel and out-of-pocket expenses incurred in connection with attendance at
meetings of the Board.

During February 1997, Parent made a contingent grant of 25,000 options to
each of Messrs. Fisher, Schneider and Page with an exercise price of $7.50 per
share, such options to vest in 25% increments for each year that the optionee
participates in at least 50% of Board meetings. The options were granted
subject, among other things, to Parent obtaining shareholder approval to
increase the number of shares of Class A Common Stock that it is authorized to
issue.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION. The following table sets forth certain information
concerning the cash and non-cash compensation earned during fiscal years 1994,
1995 and 1996 by the Company's Chief Executive Officer and by each of the four
other most highly compensated executive officers of the Company or its
subsidiaries whose individual combined salary and bonus exceeded $100,000 during
the fiscal year ended December 31, 1996 (collectively, the "Named Executive
Officers"). The Issuer's officers are not separately compensated.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------
----------------------------------------------- SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) ($)(1)(2)
- ------------------------------ ---- ------------ -------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Duncan 1996 120,000(3) 3,000 -0- -0- 178,633
President and Chief 1995 119,550(4) -0- -0- -0- 159,206
Executive Officer 1994 89,550(4) 99,960 -0- -0- 121,747

William C. Behnke 1996 110,000 5,363 -0- -0- 22,066
Senior Vice President- 1995 110,002 -0- -0- 50,000 20,066
Marketing and Sales 1994 109,168 136,194 -0- -0- 66

G. Wilson Hughes 1996 150,000 6,040 -0- -0- 100,920
Executive Vice President 1995 150,002 -0- -0- 260,000 91,046
and General Manager 1994 150,003 89,698 -0- -0- 75,686

John M. Lowber 1996 125,000 5,860 -0- -0- 78,842
Senior Vice President- 1995 125,000 -0- -0- 100,000 80,321
Administration, Chief 1994 125,514 117,757 -0- -0- 77,814
Financial Officer,
Secretary/Treasurer

Dana L. Tindall 1996 110,000 34,630 -0- -0- 10,203
Senior Vice President- 1995 103,699 24,000 -0- -0- 14,949
Regulatory Affairs 1994 93,555 99,082 -0- -0- 63,241(5)
</TABLE>

- ------------------------------

(1) The amounts reflected in this column include accruals under deferred
compensation agreements between the Company and the named individuals as
follows: Mr. Duncan, $161,551, $144,470 and $110,425 in 1996, 1995 and 1994,
respectively; Mr. Behnke, $22,000 and $20,000 in 1996 and 1995,
respectively; Mr. Hughes, $85,128, $74,741 and $59,843 in 1996, 1995 and
1994, respectively and Mr. Lowber, $65,000 in each of 1996, 1995 and 1994.
See "--Employment and Deferred Compensation Agreements."

(2) The amounts reflected in this column also include matching contributions by
the Company under the Stock Purchase Plan as follows: Mr. Duncan, $15,000,
$10,756, and $9,240 in 1996, 1995 and 1994, respectively; Mr. Hughes,
$14,475, $12,750, and

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<PAGE>
$15,000 in 1996, 1995 and 1994, respectively; Mr. Lowber, $12,857, $12,852,
and $11,844 in 1996, 1995 and 1994, respectively; and Ms. Tindall, $10,137,
$12,802, and $13,190 in 1996, 1995 and 1994, respectively. Amounts shown for
Mr. Duncan include premiums of $82 under a term life insurance policy paid
in each of 1996, 1995 and 1994; $2,000 paid to Mr. Duncan in each of 1996,
1995 and 1994 for serving on the Board; and $1,898 paid to Mr. Duncan in
1995 in lieu of a contribution by the Company to the Stock Purchase Plan.
Amounts shown for Mr. Behnke include premiums of $66 under a term life
insurance policy paid in each of 1996, 1995 and 1994. Amounts shown for Mr.
Hughes include premiums of $1,317, $1,305 and $843 under life insurance
policies paid in each of 1996, 1995 and 1994, respectively; and $2,250 paid
to Mr. Hughes in 1995 in lieu of a contribution by the Company to the Stock
Purchase Plan. Amounts shown for Mr. Lowber include premiums of $985, $980
and $970 under life insurance policies paid in each of 1996, 1995 and 1994,
respectively; and $1,489 paid to Mr. Lowber in 1995 in lieu of a
contribution by the Company to the Stock Purchase Plan. Amounts shown for
Ms. Tindall include premiums of $66, $54 and $51 under a term life insurance
policy paid in 1996, 1995 and 1994, respectively; and $2,093 paid to Ms.
Tindall in 1995 in lieu of a contribution by the Company to the Stock
Purchase Plan.

(3) Does not include $50,000 of Mr. Duncan's 1997 salary that was paid in
advance during 1996.

(4) Mr. Duncan received $30,000 of his 1995 salary as an advance in 1994. The
$30,000 advance payment is included in his 1995 salary.

(5) The Company and Ms. Tindall entered into a deferred compensation agreement
dated August 15, 1994, which provides that, in the event Ms. Tindall
exercises stock options pursuant to the Stock Option Agreement between the
Company and Ms. Tindall dated June 2, 1993, the Company will pay to Ms.
Tindall $1.00 per share so exercised, up to a maximum of $50,000.

OPTION EXERCISES AND FISCAL YEAR-END VALUES

The following table sets forth information concerning each exercise of stock
options during the year ended December 31, 1996 by each of the Named Executive
Officers and the fiscal year-end value of unexercised options held by each of
the Named Executive Officers.

AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE- MONEY OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Duncan................... -0- $ -0- 140,000 60,000 $ 717,500 $ 307,500
William C. Behnke.................. -0- -0- 185,190 50,000 1,204,584 206,250
G. Wilson Hughes................... -0- -0- 250,000 260,000 1,593,750 1,072,500
John M. Lowber..................... -0- -0- 205,000 145,000 1,275,625 643,125
Dana L. Tindall.................... 9,517(2) 16,357(2) 106,400 50,000 528,100 236,250
</TABLE>

- ------------------------------

(1) Represents the difference between the fair market value of the securities
underlying the options and the exercise price of the options based on the
last trading price on December 31, 1996.

(2) The Company paid $16,357 to Ms. Tindall for cancellation of options to
purchase 9,517 shares of Class A Common Stock with an exercise price per
share of $2.25. The payment amount was calculated by multiplying the number
of shares by the difference between the market price of the Class A Common
Stock on the date of such cancellation and the exercise price of the options
canceled.

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<PAGE>
EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENTS

The Company entered into a Deferred Bonus Agreement with Mr. Duncan in June
1989 (the "First Duncan Agreement"). Under the First Duncan Agreement, the
Company credited $325,000 to Mr. Duncan as of June 12, 1989 as a deferred bonus
for Mr. Duncan's past service to the Company. Amounts in the account were to
accrue interest at 10% per annum unless there was an irrevocable investment
election by Mr. Duncan to have the balance in the account treated as though it
were invested in the Common Stock of Parent. In July 1989, Mr. Duncan made such
election, and the Company purchased a total of 105,111 shares of Class A Common
Stock in its name for the benefit of Mr. Duncan, which are held in treasury and
are not voted. The full amount of the deferred bonus, including the distribution
of any stock, will be due and payable to Mr. Duncan upon the termination of his
employment with the Company.

The Company entered into a Deferred Compensation Agreement with Mr. Duncan
in August 1993 (as amended, the "Second Duncan Agreement"), under which the
Company will pay to Mr. Duncan deferred compensation in an amount not to exceed
$625,000, plus interest at the rate paid by the Company under the Telephony
Credit Facility, in addition to his regular compensation. This deferred
compensation is to be credited to Mr. Duncan each July 1 that he is employed by
the Company in amounts as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------------------------------------------------------- -----------
<S> <C>
1993......................................................... $ 100,000
1994......................................................... 100,000
1995......................................................... 125,000
1996......................................................... 150,000
1997......................................................... 150,000
-----------
Total........................................................ $ 625,000
-----------
-----------
</TABLE>

All deferred compensation (including the present value of any uncredited
amounts) plus accrued interest will be due and payable in ten equal annual
payments to Mr. Duncan upon the termination of his employment with the Company;
provided that, should he voluntarily terminate his employment or if his
employment is terminated for cause, only that portion (with interest) of the
deferred compensation credited as of the December 31 immediately preceding his
termination will be due and payable, and the remainder of the deferred
compensation will be forfeited. In September 1995, the Company agreed with Mr.
Duncan that the vested and unvested portions of his deferred compensation under
the Second Duncan Agreement would be payable in shares of Class A Common Stock
in lieu of cash. To fund this obligation, the Company bought a total of 13,750
shares in the open market during September 1995 and October 1995 at a weighted
average price of $3.48 per share. In July 1996, the Company purchased from Mr.
Duncan an additional 76,470 shares of Class A Common Stock at the then market
price of $8.125 per share. In lieu of the amount to be credited in 1997, Mr.
Duncan's deferred compensation account will receive credit for 18,372 shares of
Class A Common Stock. Accordingly, the balance owed Mr. Duncan pursuant to the
Second Duncan Agreement is denominated in 90,220 shares of Class A Common Stock.
The Company is holding the shares in treasury until the shares are distributed
to Mr. Duncan. The shares are not voted and may not be disposed of by the
Company or Mr. Duncan.

On April 30, 1991, the Company entered into a deferred compensation
agreement with Mr. Hughes (as amended in 1996, the "Hughes Agreement"). Under
the terms of the Hughes Agreement, Mr. Hughes is entitled to an annual base
salary of $150,000 and customary benefits. Pursuant to the agreement, Mr. Hughes
was granted stock options in 1991 for 250,000 shares of Class A Common Stock at
an exercise price of $1.75 per share, all of which are fully vested and
exercisable. The Hughes Agreement also provides for Mr. Hughes to receive
deferred compensation, with interest compounded annually at 10%, of $50,000 in
each of 1992, 1993 and 1994, $65,000 in 1995 and $75,000 in 1996 and each year
thereafter, to accrue on December 31 of each year. Each contribution by the
Company is

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<PAGE>
accrued at the end of the year in which the contribution is made. Upon
termination, Mr. Hughes may elect to have the full balance of the deferred
compensation paid in cash, in a lump sum or in monthly installments for up to
ten years. If the monthly installment method is chosen, the unpaid balance will
continue to accrue interest at 10%. Interest accrued under the Hughes Agreement
in the amounts of $9,843, $9,741 and $10,128 during the years ended December 31,
1994, 1995 and 1996, respectively. In September 1995, the Company bought 3,750
shares of Class A Common Stock in the public market at a purchase price of
$3.375 per share to fund certain of the vested portions of Mr. Hughes' deferred
compensation. In March 1997, the Company bought 3,687 shares of Class A Common
Stock from Mr. Hughes at a purchase price of $7.75 per share, again to fund
certain of the vested portions of Mr. Hughes' deferred compensation. The stock
is held in treasury by the Company for the benefit of Mr. Hughes, is not voted
and may not be disposed of by the Company or Mr. Hughes.

The Company entered into an employment and deferred compensation agreement
with Mr. Lowber in July 1992. Under the terms of the agreement, Mr. Lowber is
entitled to an annual base salary of $125,000 and customary benefits. In
addition, Mr. Lowber is eligible to receive an annual cash bonus of up to
$30,000 based upon the Company's and his performance. The agreement also
provides for Mr. Lowber to receive deferred compensation of $450,000 ($65,000
per year from July 1992 through July 1999). If Mr. Lowber's employment or
position with the Company is terminated, or if he dies, the entire $450,000 will
be immediately payable. If Mr. Lowber voluntarily resigns, he will lose the
unvested portion of his deferred compensation. The deferred compensation has
been used to purchase a life insurance policy which has been collaterally
assigned to the Company to the extent of premiums paid by the Company. The
Company's deferred compensation contributions will be made each July 1 through
1999 and are fully vested when made. At the earlier of termination of employment
or upon election by Mr. Lowber subsequent to the end of the seven year term of
the agreement, the collateral assignment of the insurance policy will be
terminated.

In February 1995, the Company agreed to pay deferred compensation to Mr.
Behnke in the amount of $20,000 per year for each of 1995 and 1996, each
contribution by the Company to vest at the end of the calendar year during which
the allocation was made, and accruing interest at 10% per annum. The first
allocation under the plan was made in December 1995. Effective January 1, 1997,
the Company and Mr. Behnke entered into a compensation agreement (the "Behnke
Agreement") which provides for compensation through December 31, 2001. The
Behnke Agreement provides for base compensation of $150,000 per year, increasing
$5,000 annually for the years ending December 31, 1999, 2000 and 2001. The
Behnke Agreement provides for target incentive compensation of $45,000 per year
of which 78% will be deferred. Pursuant to the Behnke Agreement, the Company
agreed to grant Mr. Behnke an option to purchase 100,000 shares of Class A
Common Stock at an exercise price of $7.00 per share, which will vest in equal
amounts on January 1 of 2000, 2001 and 2002, the grant of such options being
contingent on, among other things, Parent obtaining shareholder approval to
increase the number of shares of Class A Common Stock that it is authorized to
issue. Pursuant to the Behnke Agreement, the Company will create a deferred
compensation account for Mr. Behnke in the amount of $285,000, of which $40,000
was vested December 31, 1996 and the rest of which will vest as earned under the
incentive compensation provision of the Behnke Agreement. Mr. Behnke may direct
the Company to invest the entire $285,000 in Parent's Common Stock. The vested
portions of the deferred compensation account will be paid to Mr. Behnke upon
termination of his employment with the Company. The Company also agreed to
cooperate with Mr. Behnke to sell in the Stock Offering 35,000 shares of Class A
Common Stock that he will receive upon exercise of vested stock options.

In February 1995, the Company established a non-qualified, unfunded deferred
compensation plan to provide a means by which certain employees of the Company
may elect to defer receipt of designated percentages or amounts of their
compensation and to provide a means for certain other deferrals of compensation.
Employees eligible to participate in the plan are determined by the Board. The
Company may, at its discretion, contribute matching deferrals in amounts
selected by the Company. Participants

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<PAGE>
immediately vest in all elective deferrals and all income and gain attributable
to that participation. Matching contributions and all income and gain
attributable to them vest on a case-by-case basis as determined by the Company.
Participants may elect to be paid in either a single lump-sum payment or annual
installments over a period not to exceed 10 years. Vested balances are payable
upon termination of employment, unforeseen emergencies, death or total
disability and change of control or insolvency of the Company. Participants are
general unsecured creditors of the Company with respect to deferred compensation
benefits of the plan. Mr. Lowber participated in the plan with respect to a
deferral of $56,000 earned in 1995 which was paid in 1996. As of the date of
this Prospectus, Mr. Lowber is the only Named Executive Officer to participate
in the plan.

1997 STOCK OPTION GRANTS

During February 1997, Parent made a contingent grant of options to purchase
Class A Common Stock to certain executive officers and non-employee directors of
Parent, subject, among other things, to Parent obtaining shareholder approval to
increase the number of shares of Class A Common Stock that Parent is authorized
to issue. The approved contingent options include 25,000 options to each of Mr.
Fisher, Mr. Schneider and Mr. Page with an exercise price of $7.50 per share,
such options to vest in 25% increments for each year that the optionee
participates in at least 50% of Board meetings. The contingent grant of 100,000
options at an exercise price of $7.00 per share to each of Mr. Lowber and Ms.
Tindall was also approved. Mr. Lowber's options vest ratably over a three-year
period beginning in December 1999 and Ms. Tindall's options vest ratably over a
three-year period beginning in June 1999.

STOCK OPTION PLAN

Under the Company's 1986 Stock Option Plan, as amended (the "Stock Option
Plan"), the Company is authorized to grant non-qualified options to purchase up
to 3,200,000 shares of Class A Common Stock to officers, employees, non-employee
directors and other key employees of the Company. The number of shares for which
options may be granted is subject to adjustment upon the occurrence of stock
dividends, stock splits, mergers, consolidations and certain other changes in
corporate structure or capitalization. As of May 15, 1997, 2,408,600 shares were
subject to outstanding options, 683,062 shares had been issued upon the exercise
of options under the Stock Option Plan, and 108,338 shares remained available
for additional grants under the Stock Option Plan. Shares of Class A Common
Stock issued under the Stock Option Plan have been registered under the
Securities Act on Form S-8. The Company intends to seek shareholder approval to
increase the number of options available for grant under the Stock Option Plan
by 2.5 million.

The Stock Option Plan is administered by the Board or, in certain instances,
by a committee of disinterested persons which selects optionees and determines
the terms of each option, including the number of shares covered by each option,
the exercise price and the option exercise period which, under the Stock Option
Plan, may be from six months through up to ten years from the date of grant.
Options granted that have not become exercisable terminate upon the termination
of the employment or directorship of the optionholder, and exercisable options
terminate from one month to one year after such termination, depending on the
cause of such termination. If an option expires or terminates, the shares
subject to such option become available for additional grants under the Stock
Option Plan.

STOCK PURCHASE PLAN

In December 1986, the Company adopted an Employee Stock Purchase Plan (as
amended, the "Stock Purchase Plan"), that is qualified under Section 401 of the
Internal Revenue Code of 1986, as amended. All employees of the Company who have
completed at least one year of service are eligible to participate in the Stock
Purchase Plan. Eligible employees may elect to reduce their taxable compensation
in any even dollar amount up to 10% of such compensation up to a maximum per
employee of $9,500 for 1997. Employees may contribute up to an additional 10% of
their compensation with after-tax

88
<PAGE>
dollars. Subject to certain limitations, the Company may make matching
contributions of Common Stock for the benefit of employees, which contributions
vest over six years. No more than 10% of any one employee's compensation will be
matched in any year. In addition, the combination of salary reductions,
after-tax contributions and Company matching contributions for any employee
cannot exceed the lesser of $30,000 or 25% of such employee's compensation
(determined after salary reduction) for any year.

Prior to July 1, 1995, employee and Company contributions were invested in
Common Stock. On and after that date, employees could direct their contributions
to be invested in Common Stock, MCI common stock, TCI common stock or various
identified mutual funds. Employee contributions invested in Common Stock are
eligible to receive up to 100% Company matching contributions in Common Stock as
determined by the Company each year. Employee contributions that are directed
into investments other than Common Stock are eligible to receive Company
matching contributions of up to 50%, as determined by the Company each year. All
contributions are invested in the name of the plan for the benefit of the
respective participants in the plan. The participants generally do not have
voting or disposition power with respect to the Company shares allocated to
their accounts; such shares are voted by the plan committee. However, pursuant
to the Stock Purchase Plan the Company offered all participants the opportunity
to include in the Stock Offering up to 50% of the Common Stock allocated to them
under the Stock Purchase Plan.

The Stock Purchase Plan is administered through a plan administrator
(currently Alfred J. Walker) and a plan committee appointed by the Board. The
assets of the plan are invested from time to time by the trustee at the
direction of the plan committee, except that participants have the right to
direct the investment of their contributions to the Stock Purchase Plan
(although an election to invest in Common Stock is generally irrevocable). The
plan administrator and members of the plan committee are all employees of the
Company or its subsidiaries. The plan committee has broad administrative
discretion under the terms of the plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is composed of all members of the Board, and the
identity and relationships of the Board members to the Company are described
elsewhere in this Prospectus. See "Management--Directors and Executive
Officers," "Principal and Selling Shareholders" and "Certain Transactions."
During the year ended December 31, 1996, Messrs. Walp and Duncan, both Named
Executive Officers, participated in deliberations of the Compensation Committee
concerning executive officer compensation other than deliberations concerning
their own compensation.

CERTAIN TRANSACTIONS

MCI AGREEMENTS

As of May 15, 1997, MCI owned 22.6% of the outstanding combined Common
Stock, representing 26.6% of the total voting power of the Common Stock. After
giving effect to the Stock Offering, MCI will own 19.4% of the outstanding
combined Common Stock, representing 24.5% of the total voting power. In 1993,
MCI entered into a significant business relationship with the Company which
includes the following agreements: (i) under the MCI Traffic Carriage Agreement,
the Company agreed to terminate all Alaska-bound MCI long distance traffic and
MCI agreed to terminate all of the Company's long distance traffic terminating
in the lower 49 states, excluding Washington, Oregon and Hawaii; (ii) MCI
licensed certain service marks to the Company for use in Alaska; (iii) MCI, in
connection with providing to the Company credit enhancement to permit the
Company to purchase a portion of an undersea cable linking Seward, Alaska, with
Pacific City, Oregon, leased from the Company all of the capacity owned by the
Company on the undersea fiber optic cable and the Company leased such capacity
back from MCI; (iv) MCI purchased certain service marks of the Company; and (v)
the parties agreed to share some communications network resources and various
marketing, engineering and operating resources. The Company also handles MCI's
800 traffic originating in Alaska and terminating in the lower 49 states and

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handles traffic for MCI's calling card customers when they are in Alaska, while
MCI originates calls for the Company's calling card customers when they are in
the lower 49 states. Revenues attributed to the MCI Traffic Carriage Agreement
in 1996 were approximately $29.2 million, or approximately 17.7% of total
revenues. Concurrently with entering into the MCI Traffic Carriage Agreement,
MCI purchased approximately 31% of the then outstanding Class A Common Stock and
approximately 31% of the then outstanding Class B Common Stock and presently
controls nominations to two seats on the Board pursuant to the Voting Agreement.
MCI's current nominees are Mr. Gerdelman, the President of Network Services for
MCI, and Mr. Lynch, a Senior Vice President of MCI. Concurrently with the
Company's acquisition of the Cable Systems effective October 31, 1996, MCI
purchased an additional 2.0 million shares of Class A Common Stock for $13.0
million or $6.50 per share, a 30% premium to the $5.00 per share market price
immediately preceding the announcement of the Company's acquisition of the Cable
Systems.

WESTMARC AGREEMENTS

The Company purchased services and used certain facilities of WestMarc, a
wholly owned subsidiary of TCI, to allow the Company to provide its
telecommunications services in certain of the lower 49 states. The total of such
purchases from WestMarc by the Company during the years ended December 31, 1995
and 1996 were approximately $245,000 and $244,000, respectively. The Company
expects to continue purchasing services from WestMarc at levels comparable to
past purchases. TCI controls nominations to two seats on the Board pursuant to
the Voting Agreement. Its current nominees are Mr. Fisher and Mr. Romrell. TCI
expects to sell all of its shares of Common Stock in the Stock Offering. If it
does so, it will no longer be subject to the Voting Agreement and each other
party to the agreement will have the right to withdraw from the Voting Agreement
by giving written notice to the other parties. The Company currently expects
that TCI's nominees to the Board will continue as directors of Parent and that
the other parties will not terminate their rights and obligations under the
Voting Agreement.

PRIME MANAGEMENT AGREEMENT

In connection with its acquisition of the Cable Systems, the Company entered
into the Prime Management Agreement with Prime Management to manage the Cable
Systems. After giving effect to the Stock Offering, the Voting Prime Sellers
will own 18.0% of the total outstanding combined Common Stock, representing
10.3% of the total voting power, and will control nominations to two seats on
the Board pursuant to the Voting Agreement.

Under the Prime Management Agreement, the Company will pay to Prime
Management a net annualized fee for managing the Cable Systems in the amount of
$1,000,000 for the year ending October 31, 1997, $750,000 for the year ending
October 31, 1998, and $500,000 for each year ending October 31 thereafter that
the Prime Management Agreement is in effect. Any portion of the management fee
which is past due shall bear interest at a rate per annum equal to 17.5% until
paid. In addition, the Company is required to reimburse Prime Management for any
costs and expenses incurred by it in connection with the Cable Systems,
including travel and entertainment expenses (the contract states that such costs
and expenses are not anticipated to exceed $200,000 on an annualized basis). The
Prime Management Agreement has a term of nine years but either party may
terminate the agreement in its discretion after October 31, 1998.

DUNCAN LEASE

The Company entered into a long-term capital lease agreement (the "Lease")
in 1991 with a partnership in which Mr. Duncan, the President, CEO and a
director of the Company, held a 50% ownership interest. Mr. Duncan sold his
interest in the partnership in 1992 to Dani Bowman, who later became Mr.
Duncan's spouse, but remained a guarantor on the note issued by National Bank of
Alaska that was used to finance the acquisition of the property subject to the
Lease. The property under the

90
<PAGE>
Lease consists of a building presently occupied by the Company (the "Property").
The Lease term is 15 years with monthly payments of $14,400, increasing in $800
increments at each two year anniversary of the Lease, beginning in 1993. If the
partnership sells the Property prior to the end of the tenth year of the Lease,
the partnership will pay to the Company one-half of the net proceeds in excess
of $900,000. If the Property is not sold prior to the end of the tenth year of
the Lease, the partnership will pay to the Company the greater of (i) one-half
of the appreciated value of the Property over $900,000 and (ii) $500,000. The
Property was capitalized in 1991 at the partnership's cost of $900,000 and the
Lease obligation was recorded in the consolidated financial statements of the
Company located elsewhere in this Prospectus.

DUNCAN AND HUGHES STOCK SALES

In July 1996, the Company purchased 76,470 shares of Class A Common Stock
from Mr. Duncan at the then market price of $8.125 per share. The shares were
purchased for the purpose of funding Mr. Duncan's deferred compensation account
under the Second Duncan Agreement, following his election to have the balance
owed to him denominated in Class A Common Stock in lieu of cash. The Company is
holding the shares in treasury until the shares are distributed to Mr. Duncan.
The shares are not voted and may not be disposed of by the Company or Mr.
Duncan. See "Management--Executive Compensation" and "--Employment and Deferred
Compensation Agreements."

In March 1997, the Company purchased 3,687 shares of Class A Common Stock
from Mr. Hughes at the then market price of $7.75 per share. The shares were
purchased for the purpose of funding Mr. Hughes's deferred compensation account
under the Hughes Agreement. The Company is holding the shares in treasury until
they are distributed to Mr. Hughes. The shares are not voted and may not be
disposed of by the Company or Mr. Hughes. See "Management--Executive
Compensation" and "--Employment and Deferred Compensation Agreements."

INDEBTEDNESS OF MANAGEMENT

A significant portion of the compensation paid to executive officers of the
Company is in the form of stock options. Because insider sales of capital stock
of Parent upon exercise of such options may have a negative impact on the price
of Common Stock, the Board has encouraged executive officers of the Company not
to exercise stock options and sell the underlying stock to meet personal
financial requirements, and has instead extended loans to such executive
officers secured by their shares or options. Total indebtedness of management at
May 15, 1997 was $1,742,603 (including accrued interest of $259,244), $1,073,359
in principal amount of which was secured by shares or options and $185,000 in
principal amount of which was otherwise secured by collateral of the borrowers.

As of May 15, 1997, Mr. Duncan was indebted to the Company in the aggregate
principal amount of $700,000 plus accrued interest of $142,357 (the "Outstanding
Duncan Loans"). Mr. Duncan borrowed $500,000 of the Outstanding Duncan Loans
from the Company in August 1993 to repay a portion of indebtedness to WestMarc
that he assumed from others. The $500,000 loan accrues interest at the Company's
variable rate under the Telephony Credit Facility and is secured by 223,000
shares of Class A Common Stock owned by Mr. Duncan pursuant to the Pledge
Agreement between Mr. Duncan and the Company dated August 13, 1993. The
principal becomes due and payable, together with accrued interest, on the
earlier of the termination of Mr. Duncan's employment with the Company and July
30, 1998. This note is nonrecourse to Mr. Duncan.

The Company loaned $150,000 of the Outstanding Duncan Loans to Mr. Duncan in
December 1996 and an additional $50,000 in January 1997 for his personal
requirements. These loans accrue interest at the Company's variable rate under
the Telephony Credit Facility, are unsecured and become due and payable,
together with accrued interest, on December 31, 2001.

91
<PAGE>
The largest aggregate principal amount of indebtedness owed by Mr. Duncan to
the Company at any time since January 1, 1996 was $710,000, $700,000 of which
remained outstanding at May 15, 1997. During 1996, Mr. Duncan borrowed from and
repaid to the Company the principal amount of $210,000 for his personal
requirements. The $210,000 loan accrued interest at the Company's variable rate
under the Telephony Credit Facility and was secured by Class A Common Stock
owned by Mr. Duncan. During 1996, Mr. Duncan also repaid the Company for $1,638
of payments made by the Company to others on behalf of Mr. Duncan during 1995.
Such amounts did not accrue interest and were unsecured.

As of May 15, 1997, Mr. Behnke, Mr. Dowling and Ms. Tindall were indebted to
the Company in the respective principal amounts of $148,000, $310,359 and
$70,000, plus accrued interest of $24,883, $78,992 and $6,881, respectively. The
$148,000 owed by Mr. Behnke is secured by options to purchase 85,190 shares of
Class A Common Stock (the "Behnke Collateral"), is due and payable, together
with accrued interest, on June 30, 1997, and consists of (i) $48,000 borrowed in
April 1993 for his personal requirements, which amount bears interest at 9% per
annum, (ii) $50,000 borrowed in September 1995 for his personal requirements,
which amount bears interest at the Company's variable rate under the Telephony
Credit Facility and (iii) $50,000 borrowed in January 1997 for his personal
requirements, which amount bears interest at the Company's variable rate under
the Telephony Credit Facility. The $310,359 owed by Mr. Dowling bears interest
at the rate of 10% per annum, is secured by 160,297 shares of Class A Common
Stock and 74,028 shares of Class B Common Stock and consists of $224,359
borrowed in August 1994 and $86,000 borrowed in April 1995, each to pay income
taxes due upon exercise of stock options. Mr. Dowling's loans are payable in
equal installments of principal and interest each year for ten years beginning
in August 1995. Payment has not yet been made on the notes, and Mr. Dowling is
currently negotiating extensions of the notes with the Company. The Company
loaned Ms. Tindall $70,000 for her personal requirements in January 1996, which
amount bears interest at the Company's variable rate under the Telephony Credit
Facility, is secured by options to purchase 156,400 shares of Class A Common
Stock and is due and payable, together with accrued interest, on January 16,
1999. Ms. Tindall is required to make prepayments on the note equal to 20% of
the gross amount of any incentive compensation earned by her. The largest
aggregate principal amount of indebtedness owed by each of Mr. Behnke, Mr.
Dowling and Ms. Tindall to the Company at any time since January 1, 1996 was
$148,000, $310,359 and $70,000, respectively.

The Company loaned $45,000 to Mr. Hughes in December 1995 for his personal
requirements. The principal under the promissory note bears interest at the
Company's variable rate under the Telephony Credit Facility, is secured by
options to purchase 250,000 shares of Class A Common Stock and by 3,000 shares
of Class A Common Stock owned by Mr. Hughes (the "Hughes Collateral") and is
due, together with accrued interest, on March 31, 1997. Mr. Hughes is currently
negotiating an extension of the note with the Company. Accrued interest under
the note totaled $4,925 at May 15, 1997. In August 1996, Mr. Hughes received an
advance of $25,000 from the Company. This indebtedness does not bear interest,
is secured by the Hughes Collateral and is to be repaid from future incentive
compensation payments earned by Mr. Hughes.

The Company loaned $185,000 to Mr. Lowber during April 1997 to purchase real
property. The promissory note will be secured by a deed of trust for such
property, bears interest at 6.49% and will be due and payable, together with
accrued interest, in three equal annual installments beginning June 30, 2000.

AGREEMENT NOT TO EXERCISE OPTIONS

The number of authorized but unissued shares of Class A Common Stock as of
the date of this Prospectus, net of shares reserved for issuance upon exercise
of options and conversion of outstanding shares of Class B Common Stock, is
approximately 5.2 million. Upon consummation of the Stock Offering, Parent will
be required to issue approximately 7.0 million shares of Class A Common Stock.
In order to make available for issuance an additional 1.8 million shares of
Class A Common Stock in

92
<PAGE>
addition to the 5.2 million currently available, certain holders of options to
acquire an aggregate of approximately 1.8 million shares of Class A Common Stock
have agreed not to exercise those options until such time as Parent's
shareholders have approved an increase in the amount of authorized but unissued
Class A Common Stock. The foregoing agreements require Parent to use its best
efforts to obtain shareholder approval to increase its authorized Class A Common
Stock as promptly as practicable, but not before its next annual meeting.

REGISTRATION RIGHTS AGREEMENTS

The Company has entered into registration rights agreements (the
"Registration Rights Agreements") with TCI, MCI and the former owners of Prime,
Alaskan Cable and Alaska Cablevision. Approximately 24,315,082 shares of Class A
Common Stock and 1,865,834 shares of Class B Common Stock were subject to the
Registration Rights Agreements as of May 15, 1997. After giving effect to the
Stock Offering, 18,786,491 shares of Class A Common Stock and 1,275,791 shares
of Class B Common Stock will be subject to the Registration Rights Agreements.
The terms of the Registration Rights Agreements vary although they generally
share several common terms.

If the Company proposes to register any of its securities under the
Securities Act for its own account or for the account of other shareholders, the
Company must notify all of the holders under the Registration Rights Agreements
of the Company's intent to register such common stock and allow the holders an
opportunity to include their shares ("Registrable Shares") in the Company's
registration. Each holder also has the right under certain circumstances to
require the Company to register all or any portion of such holder's Registrable
Shares under the Securities Act. The Registration Rights Agreements are subject
to certain limitations and restrictions including the right of the Company to
limit the number of Registrable Shares included in the registration. Generally,
the Company is required to pay all registration expenses in connection with each
registration of Registrable Shares pursuant to the Registration Rights
Agreements.

The Registration Rights Agreements between the Company and the Prime Sellers
and between the Company and Alaskan Cable require the Company to effect no more
than two registrations at the request of each holder; provided that each
registration request by the Prime Sellers or Alaskan Cable must include
Registrable Shares having an aggregate market value of not less than $2.5
million. The first demand registration under the Prime and Alaskan Cable
Registration Rights Agreements may be requested only by the holders of a minimum
of 25% of the Registrable Shares.

The Registration Rights Agreement between the Company and the shareholders
of Alaska Cablevision requires the Company to effect no more than 10
registrations at the request of such shareholders; provided, that each
registration request must include at least 150,000 Registrable Shares. The first
demand registration under the Alaska Cablevision Registration Rights Agreement
may be requested only by the holders of a minimum of 10% of the Registrable
Shares.

The Registration Rights Agreement between the Company and MCI dated March
31, 1993 requires the Company to effect no more than two registrations at the
request of MCI; provided, that each registration request by MCI must include
Registrable Shares having an aggregate market value of more than $500,000. MCI
executed a second Registration Rights Agreement with the Company dated October
31, 1996, pursuant to which the Company is required to effect no more than two
registrations at the request of MCI, each request to cover Registrable Shares
having an aggregate market value of at least $1.5 million.

Under the Registration Rights Agreement between the Company and TCI
(originally with WestMarc but transferred to TCI when the Registrable Shares
were transferred by WestMarc), the Company is required, subject to specified
limitations, to effect no more than two registrations at the request of TCI, so
long as the request relates to Registrable Shares having an aggregate market
value of more than $500,000.

93
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Class A Common Stock and Class B Common Stock as of May 15, 1997,
before and after giving effect to the Stock Offering, by (i) each person known
by the Company to beneficially own 5% or more of the outstanding shares of Class
A Common Stock or Class B Common Stock, (ii) each director of the Company, (iii)
each of the Named Executive Officers, and (iv) all current executive officers
and directors of the Company as a group. The table also reflects the number of
shares to be sold by each of the selling shareholders in the Stock Offering. All
information with respect to beneficial ownership has been furnished to the
Company by the respective shareholders of the Company. One hundred percent of
the Issuer's outstanding capital stock is owned by Parent.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO THE STOCK OFFERING
-----------------------------------------------------
PERCENT OF
AMOUNT AND NATURE TOTAL COMBINED
NAME AND ADDRESS OF BENEFICIAL TITLE OF OF BENEFICIAL PERCENT SHARES VOTING
OWNER (2) CLASS OWNERSHIP OF CLASS OUTSTANDING POWER
- ------------------------------ -------- ----------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>

PARTIES TO VOTING AGREEMENT:

MCI Telecommunications Class A 8,251,509(3) 21.6% 22.6% 26.6%
Corporation Class B 1,275,791(3) 31.3%
1801 Pennsylvania Ave., N.W.
Washington, D.C. 20006

Ronald A. Duncan Class A 1,011,988(3)(5) 2.6% 3.0% 4.3%
Class B 239,929(3)(5) 5.9%

Robert M. Walp Class A 572,845(3)(6) 1.5% 2.1% 4.6%
Class B 303,457(3)(6) 7.5%

Tele-Communications, Inc. Class A -- -- 1.4% 7.5%
5619 DTC Parkway Class B 590,043(3) 14.5%
Englewood, CO 80111

Voting Prime Sellers:

Prime Cable Growth Partners, Class A 7,423,569(3) 19.5% 17.6% 9.4%
L.P. and its affiliates (4) Class B -- --
3000 One American Center
600 Congress Avenue
Austin, TX 78701

William Blair Venture Partners Class A 1,237,262(3) 3.2% 2.9% 1.6%
III Limited Partnership Class B -- --
222 West Adams Street
Chicago, IL 60606

Austin Ventures, L.P. Class A 791,848(3) 2.1% 1.9% 1.0%
114 West 7th Street Class B -- --
Suite 1300
Austin, TX 78701

Centennial Fund III, L.P. Class A 742,357(3) 1.9% 1.8% *
1428 15th Street Class B -- --
Denver, CO 80202

BancBoston Capital, Inc. Class A 332,323(3) * * *
100 Federal Street Class B -- --
Boston, MA 02110

First Chicago NBD Corporation Class A 301,407(3) * * *
One First National Plaza Class B -- --
Chicago, IL 60670

<CAPTION>
SHARES BENEFICIALLY OWNED
AFTER THE STOCK OFFERING (1)
--------------------------------------------------------
NUMBER OF PERCENT OF
CLASS A TOTAL COMBINED
NAME AND ADDRESS OF BENEFICIAL SHARES AMOUNT AND NATURE OF PERCENT SHARES VOTING
OWNER (2) OFFERED BENEFICIAL OWNERSHIP OF CLASS OUTSTANDING POWER
- ------------------------------ ------------- -------------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
PARTIES TO VOTING AGREEMENT:
MCI Telecommunications -- 8,251,509(3) 18.3% 19.4% 24.5%
Corporation 1,275,791(3) 31.3%
1801 Pennsylvania Ave., N.W.
Washington, D.C. 20006
Ronald A. Duncan -- 791,945(3)(5)(18) 1.8% 2.5% 6.3%
459,972(3)(5)(18) 11.3%
Robert M. Walp 200,000(6) 372,845(3)(6) * 1.4% 4.0%
303,457(3)(6) 7.5%
Tele-Communications, Inc. 590,043(18) -- -- -- --
5619 DTC Parkway -- --
Englewood, CO 80111
Voting Prime Sellers:
Prime Cable Growth Partners, 1,484,713(17) 5,938,856(3)(4) 13.1%(4) 12.1%(4) 6.9%(4)
L.P. and its affiliates (4) -- --
3000 One American Center
600 Congress Avenue
Austin, TX 78701
William Blair Venture Partners -- 1,237,262(3) 2.7% 2.5% 1.4%
III Limited Partnership -- --
222 West Adams Street
Chicago, IL 60606
Austin Ventures, L.P. -- 791,848(3) 1.8% 1.6% *
114 West 7th Street -- --
Suite 1300
Austin, TX 78701
Centennial Fund III, L.P. -- 742,357(3) 1.6% 1.5% *
1428 15th Street -- --
Denver, CO 80202
BancBoston Capital, Inc. 257,793 74,530(3) * * *
100 Federal Street -- --
Boston, MA 02110
First Chicago NBD Corporation 233,810 67,597(3) * * *
One First National Plaza -- --
Chicago, IL 60670
</TABLE>

94
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO THE STOCK OFFERING
-----------------------------------------------------
PERCENT OF
AMOUNT AND NATURE TOTAL COMBINED
NAME AND ADDRESS OF BENEFICIAL TITLE OF OF BENEFICIAL PERCENT SHARES VOTING
OWNER (2) CLASS OWNERSHIP OF CLASS OUTSTANDING POWER
- ------------------------------ -------- ----------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>

Madison Dearborn Partners V Class A 30,916(3) * * *
Three First National Plaza Class B -- --
Suite 1330
Chicago, IL 60602

Aggregate Voting Prime Sellers Class A 10,859,682 28.5% 25.7% 13.8%
Class B -- --

AGGREGATE SHARES SUBJECT TO Class A 20,422,112(7) 53.5% 54.0% 56.3%
VOTING AGREEMENT Class B 2,400,591(7) 59.0%

Jack Kent Cooke Incorporated Class A 2,923,077 7.7% 6.9% 3.7%
Kent Farms Route 713 Class B -- --
Middleburg, VA 20117

Kearns-Tribune Corporation Class A 300,200 * 1.2% 3.2%
400 Tribune Building Class B 225,000 5.5%
Salt Lake City, UT 84111

General Communication, Inc. Class A 2,001,566 5.2% 5.1% 4.4%
Employee Stock Purchase Plan Class B 145,147 3.6%
(8)
2550 Denali Street,
Suite 1000
Anchorage, AK 99503

William C. Behnke Class A 185,274(9) * * *
Class B -- --

Donne F. Fisher (individually Class A 287,975(10) * 2.2% 8.6%
and as Co-Personal Class B 648,491(10) 15.9%
Representative to the Estate
of Bob Magness)

Jeffery C. Garvey Class A 8,246(11) * * *
Class B -- --

John W. Gerdelman Class A -- -- -- --
Class B -- --

William P. Glasgow Class A -- -- -- --
Class B -- --

G. Wilson Hughes Class A 341,670(12) * * *
Class B 2,735(12) *

John M. Lowber Class A 271,762(13) * * *
Class B 6,266(13) *

Donald Lynch Class A -- -- -- --
Class B -- --

Carter F. Page Class A 197,487(14) * * *
Class B 25,246 *

Larry E. Romrell Class A -- -- * *
Class B 328 *

James M. Schneider Class A -- -- -- --
Class B -- --

Dana L. Tindall Class A 153,905(15) * * *
Class B 3,792(15) *

<CAPTION>
SHARES BENEFICIALLY OWNED
AFTER THE STOCK OFFERING (1)
--------------------------------------------------------
NUMBER OF PERCENT OF
CLASS A TOTAL COMBINED
NAME AND ADDRESS OF BENEFICIAL SHARES AMOUNT AND NATURE OF PERCENT SHARES VOTING
OWNER (2) OFFERED BENEFICIAL OWNERSHIP OF CLASS OUTSTANDING POWER
- ------------------------------ ------------- -------------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Madison Dearborn Partners V 23,982 6,934(3) * * *
Three First National Plaza -- --
Suite 1330
Chicago, IL 60602
Aggregate Voting Prime Sellers 2,000,298(20) 8,859,384(20) 19.6%(20) 18.0%(20) 10.3%(20)
-- --
AGGREGATE SHARES SUBJECT TO 2,200,298(7) 18,001,771(7)(18) 39.9%(7) 40.7%(7) 44.6%(7)
VOTING AGREEMENT 590,043(18) 2,030,591(7)(18) 49.9%
Jack Kent Cooke Incorporated 2,923,077 -- -- -- --
Kent Farms Route 713 -- --
Middleburg, VA 20117
Kearns-Tribune Corporation -- 300,200 * 1.1% 3.0%
400 Tribune Building 225,000 5.5%
Salt Lake City, UT 84111
General Communication, Inc. 446,366 1,555,200 3.4% 3.5% 3.5%
Employee Stock Purchase Plan 145,147 3.6%
(8)
2550 Denali Street,
Suite 1000
Anchorage, AK 99503
William C. Behnke 35,000(9) 150,274(9) * * *
-- --
Donne F. Fisher (individually -- 102,975(10)(18) * 1.9% 9.8%
and as Co-Personal 833,491(10)(18) 20.5%
Representative to the Estate
of Bob Magness)
Jeffery C. Garvey -- 8,246(11) * * *
-- --
John W. Gerdelman -- -- -- -- --
-- --
William P. Glasgow -- -- -- -- --
-- --
G. Wilson Hughes -- 341,670(12) * * *
2,735(12) *
John M. Lowber 32,557 239,205(13) * * *
6,266(13) *
Donald Lynch -- -- -- -- --
-- --
Carter F. Page -- 12,487(14)(18) * * 2.5%
210,246(18) 5.2%
Larry E. Romrell -- -- -- * *
328 *
James M. Schneider -- -- -- -- --
-- --
Dana L. Tindall -- 153,905(15) * * *
3,792(15) *
</TABLE>

95
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO THE STOCK OFFERING
-----------------------------------------------------
PERCENT OF
AMOUNT AND NATURE TOTAL COMBINED
NAME AND ADDRESS OF BENEFICIAL TITLE OF OF BENEFICIAL PERCENT SHARES VOTING
OWNER (2) CLASS OWNERSHIP OF CLASS OUTSTANDING POWER
- ------------------------------ -------- ----------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>

All Directors and Executive Class A 3,443,464(16) 8.8% 11.0% 20.7%
Officers As a Group (15 Class B 312,427(16) 32.2%
Persons)

Ameritas Life Insurance Class A 4,784 * * *
Corp. (19)

KLANS Associates (19) Class A 1,557 * * *

Pillsbury Master Retirement Class A 14,333 * * *
Trust (19)

Tribune Company Master Trust Class A 7,107 * * *
for Pension Plans (19)

K.D.F., a Massachusetts Class A 17,968 * * *
general partnership (19)

Fidelity Pension Trust (19) Class A 7,167 * * *

Commerce BancShares, Inc. (19) Class A 10,802 * * *

Robert G. Holman (19) Class A 144 * * *

Equitable Life Assurance Class A 9,561 * * *
Society of the United
States (19)

Donald Adams (19) Class A 107,226 * * *

Karen Evans (19) Class A 106,153 * * *

Samuel Evans (19) Class A 129,743 * * *

Jo Shepherd (19) Class A 235,897 * * *
-----

TOTAL SHARES OFFERED BY
SELLING SHAREHOLDERS

<CAPTION>
SHARES BENEFICIALLY OWNED
AFTER THE STOCK OFFERING (1)
--------------------------------------------------------
NUMBER OF PERCENT OF
CLASS A TOTAL COMBINED
NAME AND ADDRESS OF BENEFICIAL SHARES AMOUNT AND NATURE OF PERCENT SHARES VOTING
OWNER (2) OFFERED BENEFICIAL OWNERSHIP OF CLASS OUTSTANDING POWER
- ------------------------------ ------------- -------------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
All Directors and Executive 292,417 2,561,004(16)(18) 5.7% 8.9% 25.1%
Officers As a Group (15 1,902,470(16)(18) 46.7%
Persons)
Ameritas Life Insurance 4,784 -- -- -- --
Corp. (19)
KLANS Associates (19) 1,557 -- -- -- --
Pillsbury Master Retirement 14,333 -- -- -- --
Trust (19)
Tribune Company Master Trust 7,107 -- -- -- --
for Pension Plans (19)
K.D.F., a Massachusetts 17,968 -- -- -- --
general partnership (19)
Fidelity Pension Trust (19) 7,167 -- -- -- --
Commerce BancShares, Inc. (19) 10,802 -- -- -- --
Robert G. Holman (19) 144 -- -- -- --
Equitable Life Assurance 9,561 -- -- -- --
Society of the United
States (19)
Donald Adams (19) 60,000 47,226 * * *
Karen Evans (19) 106,153 -- -- -- --
Samuel Evans (19) 129,743 -- -- -- --
Jo Shepherd (19) 235,897 -- -- -- --
TOTAL SHARES OFFERED BY 6,800,000
SELLING SHAREHOLDERS
</TABLE>

- ------------------------------

* Represents beneficial ownership of less than 1% of the corresponding class
of common stock.

(1) Based upon the sale of all shares offered in the Stock Offering assuming no
exercise of the Underwriters' over-allotment option in the Stock Offering.

(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Exchange Act. Shares of Common Stock that a person has the right to acquire
within 60 days of May 15, 1997 are deemed to be beneficially owned by such
person and are included in the computation of the ownership and voting
percentages only of such person. Each person has sole voting and investment
power with respect to the shares indicated except as otherwise stated in the
footnotes to the table.

(3) Each of these persons is party to a Voting Agreement dated as of October
31, 1996 (the "Voting Agreement") and may be deemed to be the beneficial
owner of all of the 20,442,112 shares of Class A Common Stock (18,001,771
shares after the Stock Offering) and 2,400,591 shares of Class B Common
Stock (2,030,591 shares after the Stock Offering) that are subject to the
Voting Agreement. See "--Changes in Control." MCI and Centennial report
shared voting and investment power with respect to shares held by them that
are subject to the Voting Agreement. Madison Dearborn reports shared voting
power with respect to shares held by it that are subject to the Voting
Agreement. Prime, Austin Ventures, William Blair and Messrs. Duncan and Walp
report shared voting power with respect to shares held by them that are
subject to the Voting Agreement and shares held by other parties to the
Voting Agreement. Prime also reports shared investment power with respect to
shares held by it. BancBoston reports no voting power with respect to shares
held by it that are subject to the Voting Agreement.

(4) Represents the aggregate number of shares reported by the following group
members in a Schedule 13D filed with the Securities and Exchange Commission
on November 12, 1996: Prime Cable G.P., Inc., Prime Cable Growth Partners,
L.P., Prime Cable Limited Partnership, Prime II Management Group, Inc.,
Prime II Management, Inc., Prime II Management L.P., Prime Investors, L.P.,
Prime Venture I Holdings, L.P., Prime Venture I, Inc. and Prime Venture II,
L.P. Collectively, Prime Cable Growth Partners, L.P. and its affiliates have
granted to the Underwriters an option to purchase up to 2,070,000 additional

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shares of Class A Common Stock solely to cover over-allotments, if any. If
the entire over-allotment option is exercised, the shares of Class A Common
Stock held by such selling shareholders will decrease to 3,868,856 (8.6% of
the then-outstanding Class A Common Stock, representing 7.9% of the total
shares outstanding and 4.5% of the combined voting power of the
then-outstanding Common Stock).

(5) Includes 140,000 shares of Class A Common Stock which Mr. Duncan has the
right to acquire within 60 days of May 15, 1997 by the exercise of vested
stock options. Includes 95,683 shares of Class A Common Stock and 6,221
shares of Class B Common Stock allocated to Mr. Duncan under the Stock
Purchase Plan. Does not include 105,111 or 90,220 shares of Class A Common
Stock held by the Company in treasury pursuant to the First Duncan Agreement
and the Second Duncan Agreement, respectively. See "Management--Executive
Compensation" and "--Employment and Deferred Compensation Agreements." Does
not include 18,560 shares of Class A Common Stock or 8,242 shares of Class B
Common Stock held by the Amanda Miller Trust, with respect to which Mr.
Duncan has no voting or investment power. Does not include 5,760 shares of
Class A Common Stock or 27,020 shares of Class B Common Stock held by Dani
Bowman, Mr. Duncan's wife, of which Mr. Duncan disclaims beneficial
ownership.

(6) Includes 38,229 shares of Class A Common Stock and 2,408 shares of Class B
Common Stock allocated to Mr. Walp under the Stock Purchase Plan. Includes
200,000 shares of Class A Common Stock held by a charitable remainder unit
trust of which Mr. Walp is trustee, which shares will be sold in the Stock
Offering.

(7) Does not include shares allocated to Messrs. Duncan and Walp under the
Stock Purchase Plan or shares that Mr. Duncan has the right to acquire by
exercise of vested stock options. Prime Cable Growth Partners, L.P. and its
affiliates have collectively granted to the Underwriters an option to
purchase up to 2,070,000 additional shares of Class A Common Stock solely to
cover over-allotments, if any. If the entire over-allotment option is
exercised, the number of shares of Class A Common Stock held by the parties
to the Voting Agreement will decrease to 15,931,771 (35.3% of the
then-outstanding Class A Common Stock, representing 36.5% of the total
shares outstanding and 42.2% of the combined voting power of the
then-outstanding Common Stock).

(8) Voting and investment power with respect to shares held by the Stock
Purchase Plan are exercised by the plan committee comprised of Manuel
Hernandez, Valerie Longeski, Jimmy Sipes and Tami Graff, each of whom is an
employee of the Company.

(9) Includes 185,190 shares (150,190 shares after the Stock Offering) which Mr.
Behnke has the right to acquire within 60 days of May 15, 1997 by the
exercise of vested stock options. Mr. Behnke will exercise options to
purchase 35,000 shares of Class A Common Stock immediately prior to the
Stock Offering, which shares will be sold in the Stock Offering.

(10) Includes 76,668 shares of Class A Common Stock and 620,803 shares of Class
B Common Stock held by the Estate of Bob Magness, to which Mr. Fisher is
Co-Personal Representative.

(11) Mr. Garvey is a general partner of Austin Ventures, L.P. and disclaims
beneficial ownership of the shares held by that partnership and other
general partners of that partnership.

(12) Includes 310,000 shares of Class A Common Stock which Mr. Hughes has the
right to acquire within 60 days of May 15, 1997 by the exercise of vested
stock options. Includes 28,670 shares of Class A Common Stock and 2,735
shares of Class B Common Stock allocated to Mr. Hughes under the Stock
Purchase Plan. Does not include 7,437 shares of Class A Common Stock held in
treasury by the Company pursuant to the Hughes Agreement. See
"Management--Employment and Deferred Compensation Agreements."

(13) Includes 205,000 shares which Mr. Lowber has the right to acquire within 60
days of May 15, 1997 by the exercise of vested stock options. Includes
59,117 shares of Class A Common Stock (25,560 shares after the Stock
Offering) and 5,996 shares of Class B Common Stock allocated to Mr. Lowber
under the Stock Purchase Plan.

(14) Does not include 8,550 shares of Class A Common Stock held in trust for the
benefit of Mr. Page's grandchildren of which Mr. Page disclaims beneficial
ownership. The trustee of the trust is Keith Page, Mr. Page's son.

(15) Includes 116,400 shares which Ms. Tindall has the right to acquire within
60 days of May 15, 1997 by the exercise of vested stock options. Includes
37,246 shares of Class A Common Stock and 3,792 shares of Class B Common
Stock allocated to Ms. Tindall under the Stock Purchase Plan.

(16) Includes 1,123,590 shares of Class A Common Stock (1,088,590 shares after
the Stock Offering) which such persons have the right to acquire within 60
days of May 15, 1997 through exercise of vested stock options. Includes
326,296 shares of Class A Common Stock (268,879 shares after the Stock
Offering) and 29,307 shares of Class B Common Stock allocated to such
persons under the Stock Purchase Plan. Does not include ownership of parties
to the Voting Agreement other than Messrs. Duncan and Walp.

(17) Of the shares offered, 247,452 are offered by Prime Venture I Holdings,
L.P., 544,295 are offered by Prime Cable Growth Partners, L.P., 445,414
shares are offered by Prime Cable Limited Partnership and 247,452 shares are
offered by Prime

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Venture II, L.P. Prime Cable Growth Partners, L.P. and its affiliates have
collectively granted to the Underwriters an option to purchase up to
2,070,000 additional shares of Class A Common Stock solely to cover
over-allotments, if any.

(18) Immediately prior to the Stock Offering, TCI will exchange its Class B
Common Stock for Class A Common Stock with existing holders as follows: Mr.
Duncan, 220,043 shares; Mr. Fisher, 185,000 shares; and Mr. Page, 185,000
shares. As a result, TCI will not be a party to the Voting Agreement after
the Stock Offering.

(19) Each of these shareholders acquired his or her shares of Class A Common
Stock in connection with the Company's acquisition of the Cable Systems. See
"The Company--Recent Acquisition of Cable Systems."

(20) Prime Cable Growth Partners, L.P. and its affiliates have collectively
granted to the Underwriters an option to purchase up to 2,070,000 additional
shares of Class A Common Stock solely to cover over-allotments, if any. If
the entire over-allotment option is exercised, the number of shares of Class
A Common Stock held by the Voting Prime Sellers will decrease to 6,789,384
(15.0% of the then-outstanding Class A Common Stock, representing 13.8% of
the total shares outstanding and 7.9% of the combined voting power of the
then outstanding Common Stock).

CHANGES IN CONTROL

VOTING AGREEMENT. As of October 31, 1996, four principal shareholders,
including two officers and directors of the Company (Messrs. Duncan and Walp,
TCI and MCI) entered into the Voting Agreement with the Voting Prime Sellers
through their designated agent, Prime Management. The Voting Agreement replaced
a previous voting agreement among Messrs. Duncan and Walp, TCI and MCI. The
Voting Agreement provides, in part, that the voting stock of the parties will be
voted at shareholder meetings as a block in favor of two nominees proposed by
each of MCI, TCI and the Voting Prime Sellers, and one nominee proposed by each
of Messrs. Duncan and Walp. TCI expects to sell all of its shares of Common
Stock in the Stock Offering. If it does so, it will no longer be subject to the
Voting Agreement and each other party to the agreement will have the right to
withdraw from the Voting Agreement by giving written notice to the other
parties. The Company currently expects that TCI's nominees to the Board will
continue as directors and that the other parties will not terminate their rights
and obligations under the Voting Agreement. See "Management--Voting Agreement."

PLEDGED ASSETS AND SECURITIES. The obligations of the Company under the
Credit Facility, are secured by substantially all of the assets of the Company.
Upon a default by the Company under such agreements, the Company's lenders could
gain control of the assets of the Company, including the capital stock of the
Company's subsidiaries.

DESCRIPTION OF CREDIT FACILITY

The Company's existing credit facilities consist of the $62.5 million
Telephony Credit Facility, under which $29.0 million was available for borrowing
as of March 31, 1997, and the $205.0 million Cable Credit Facility, under which
$39.1 million was available for borrowing as of March 31, 1997. The Debt
Offering is contingent on the Company refinancing its existing credit facilities
with the Credit Facility on or before closing of the Debt Offering. The Company
has formed a new subsidiary, Holdings, to be the obligor under the Credit
Facility and expects that the Company will guarantee the obligations of
Holdings. The Company expects that the aggregate principal amount available to
be borrowed under the Credit Facility will be up to $300.0 million if both
Offerings are consummated or not less than $200.0 million if only the Debt
Offering is consummated. The Company anticipates that the Credit Facility will
be secured by substantially all of the assets of the Company and that it will
restrict the payment of cash dividends, limit borrowings, limit the incurrence
of additional long-term indebtedness and the issuance of additional equity and
require the maintenance of certain financial ratios.

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DESCRIPTION OF NOTES

THE NOTES WILL BE ISSUED UNDER AN INDENTURE (THE "INDENTURE") TO BE DATED AS
OF , 1997 BETWEEN THE ISSUER AND THE BANK OF NEW YORK, AS TRUSTEE
(THE "TRUSTEE"). A COPY OF THE INDENTURE HAS BEEN FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. THE INDENTURE IS
SUBJECT TO AND IS GOVERNED BY THE TRUST INDENTURE ACT OF 1939, AS AMENDED (THE
"TRUST INDENTURE ACT"). THE FOLLOWING SUMMARIES OF CERTAIN PROVISIONS OF THE
INDENTURE DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT, AND ARE QUALIFIED IN
THEIR ENTIRETY BY REFERENCE, TO THE TRUST INDENTURE ACT AND TO ALL THE
PROVISIONS OF THE NOTES AND THE INDENTURE, INCLUDING DEFINITIONS IN THE
INDENTURE OF CERTAIN TERMS. WHEREVER PARTICULAR SECTIONS OR DEFINED TERMS OF THE
INDENTURE ARE REFERRED TO IN THIS PROSPECTUS, SUCH SECTIONS OR DEFINED TERMS ARE
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. CERTAIN TERMS USED IN THIS
SECTION ARE DEFINED UNDER "--CERTAIN DEFINITIONS."

GENERAL

The Notes will mature on , 2007, and will be limited to an
aggregate principal amount of $150 million. The Notes will bear interest at the
rate set forth on the cover page of this Prospectus from , 1997, or
from the most recent interest payment date to which interest has been paid,
payable semiannually on and of each year, beginning on
, 1997, to the persons who are registered holders of the Notes at
the close of business on the preceding or , as the
case may be.

Principal of, premium, if any, and interest on the Notes will be payable in
immediately available funds, and the Notes will be exchangeable and
transferable, at an office or agency of the Issuer, one of which will be
maintained for such purpose in The City of New York (which initially will be the
corporate trust office of the Trustee) or such other office or agency permitted
under the Indenture; PROVIDED, HOWEVER, that payment of interest may be made at
the option of the Issuer by check mailed to the person entitled thereto as shown
on the Security Register. The Notes will be issued only in fully registered form
without coupons, in denominations of $1,000 or any integral multiple thereof. No
service charge will be made for any registration of transfer or exchange of
Notes, except for any tax or other governmental charge that may be imposed in
connection therewith.

Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal to the Depositary will be made by the
Issuer in immediately available funds. The Notes will trade in The Depository
Trust Company's Same-Day Funds Settlement System until maturity, and secondary
market trading activity in the Notes will therefore settle in immediately
available funds.

RANKING

The Notes will be senior unsecured obligations of the Issuer, will rank pari
passu in right of payment with all other existing and future senior indebtedness
of the Issuer and will be senior in right of payment to all future subordinated
indebtedness of the Issuer. As of March 31, 1997, on a pro forma basis after
giving effect to the Debt Offering and both the Debt Offering and the Stock
Offering, and the respective application of the net proceeds therefrom, the
total consolidated indebtedness of the Issuer would have been $218.5 million and
$173.5 million, respectively. At such date, the Issuer had no indebtedness
subordinated to the Notes.

In addition, all existing and future indebtedness and other liabilities of
the Issuer's Subsidiaries, including borrowings under the Credit Facility, will
be effectively senior in right of payment to the Notes. The total balance sheet
liabilities of the Issuer's Subsidiaries on a pro forma basis after giving
effect to the Debt Offering as of March 31, 1997, would have been $138.8 million
(or $93.8 million after giving effect to both the Debt Offering and the Stock
Offering), of which $68.6 million (or $23.5 million after giving effect to both
the Debt Offering and the Stock Offering) was indebtedness. The Issuer and its
Subsidiaries have other liabilities, including contingent liabilities, which may
be significant. Although the

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Indenture contains limitations on the amount of additional Indebtedness which
the Issuer and its Restricted Subsidiaries may Incur, the amounts of such
Indebtedness could be substantial and, in any case, significant amounts of such
Indebtedness may be Indebtedness of Subsidiaries (which will be effectively
senior in right of payment to the Notes). See "--Certain Covenants." Moreover,
claims of creditors of the Issuer's Subsidiaries, including trade creditors, and
holders of Preferred Stock of the Issuer's Subsidiaries (if any), will generally
have a priority as to the assets of such Subsidiaries over the claims of the
Issuer.

The Notes are obligations exclusively of the Issuer. Since the operations of
the Issuer are conducted through Subsidiaries, the Issuer's cash flow and the
consequent ability to service debt of the Issuer, including the Notes, are
dependent upon the earnings of its Subsidiaries and the distribution of those
earnings to, or upon loans or other payments of funds by those Subsidiaries to,
the Issuer. The payment of dividends and the making of loans and advances to the
Issuer by its Subsidiaries are subject to statutory and contractual
restrictions, are dependent upon the earnings of those Subsidiaries and are
subject to various business considerations. See "Risk Factors--Holding Company
Structure."

OPTIONAL REDEMPTION

The Notes are not redeemable prior to , 2002. At any time on or
after , 2002, the Notes are redeemable at the option of the Issuer,
in whole or in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) to the date of redemption:

If redeemed during the 12-month period commencing of the year
indicated:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- -------------------------------------------------------------------------------- -------------
<S> <C>
2002............................................................................ %
2003............................................................................ %
2004............................................................................ %
</TABLE>

and thereafter, beginning , 2005 at 100% of the principal
amount of the Notes.

Notwithstanding the foregoing, on or prior to , 2000, the
Issuer may, at its option, use the net cash proceeds of one or more Public
Equity Offerings (as defined below) to redeem up to a maximum of 33 1/3% of the
initially outstanding aggregate principal amount of Notes at a redemption price
equal to % of the principal amount of the Notes (determined at the
redemption date), together with accrued and unpaid interest thereon to the date
of redemption; PROVIDED that not less than $100 million aggregate principal
amount of the Notes are outstanding following any such redemption.

As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Stock of Parent or the Issuer, that
generates in the aggregate gross proceeds of at least $50 million, pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act; PROVIDED that, the Stock Offering shall be excluded from the
definition of Public Equity Offerings; PROVIDED FURTHER, that in the event of a
Public Equity Offering by Parent, Parent contributes to the capital of the
Issuer the portion of the net cash proceeds of such Public Equity Offering
necessary to pay the aggregate redemption price (plus accrued and unpaid
interest thereon to the redemption date) of the Notes to be redeemed pursuant to
the preceding paragraph.

In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which such Notes are listed or, if such Notes are not then listed on a national
securities exchange, on a PRO RATA basis, by lot or by such method as the
Trustee shall deem fair and appropriate; PROVIDED, HOWEVER, that no Notes of a
principal amount of $1,000 or less shall be redeemed in part; PROVIDED, FURTHER,
that if a partial redemption is made with the proceeds of a Public

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Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a PRO RATA basis or on as nearly a PRO RATA basis
as is practicable (subject to procedures of the Depository Trust Company "DTC"),
unless such method is otherwise prohibited. Notice of redemption shall be mailed
by first-class mail at least 30 but not more than 60 days before the redemption
date to each holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that related to
such Notes shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Issuer
has deposited with the Paying Agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.

SINKING FUND

There will be no mandatory sinking fund payments for the Notes.

MANDATORY OFFER TO PURCHASE UPON A CHANGE OF CONTROL

Upon the occurrence of a Change of Control, each holder of Notes shall have
the right to require the Issuer to purchase all or any part (equal to $1,000 or
an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the purchase date (the "Change of Control Payment").

Within 30 days following any Change of Control, the Issuer shall (i) cause a
notice of the Change of Control Offer to be sent at least once to the Dow Jones
News Service or similar business news service in the United States and (ii) mail
a notice to each holder of Notes stating: (1) that a Change of Control has
occurred and a Change of Control Offer is being made pursuant to the covenant
entitled "Mandatory Offer to Purchase Upon a Change of Control" and that all
Notes timely tendered will be accepted for payment; (2) the purchase price and
the purchase date, which shall be, subject to any contrary requirements of
applicable law, no earlier than 30 days nor later than 60 days from the date
such notice is mailed ("the Change of Control Payment Date"); (3) that any Note
(or portion thereof) accepted for payment (and duly paid on the Change of
Control Payment Date) pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (4) that any Notes (or
portions thereof) not tendered will continue to accrue interest; (5) a
description of the transaction or transactions constituting the Change of
Control; and (6) the procedures that holders of Notes must follow in order to
tender their Notes (or portions thereof) for payment and the procedures that
holders of Notes must follow in order to withdraw an election to tender Notes
(or portions thereof) for payment.

The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act, and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes in connection with a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
relating to the "Change of Control" provisions of the Indenture, the Issuer will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the "Change of Control" provisions
of the Indenture by virtue thereof.

Except as described above with respect to a Change of Control, the Indenture
does not contain any provisions that permit the holders of the Notes to require
that the Issuer purchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.

The Change of Control purchase feature is a result of negotiations between
the Issuer and the Underwriters. Management has no present intention to engage
in a transaction involving a Change of Control, although it is possible that the
Issuer would decide to do so in the future. Subject to the

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limitations discussed below, the Issuer could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of Indebtedness outstanding at such time or otherwise
affect the Issuer's capital structure or credit ratings. Restrictions on the
ability of the Issuer to Incur additional Indebtedness are contained in the
covenants described under "--Certain Covenants-- Limitation on Indebtedness" and
"--Certain Covenants--Limitation on Liens." Such restrictions can only be waived
with the consent of the registered holders of a majority in principal amount of
the Notes then outstanding. Except for the limitations contained in such
covenants, however, the Indenture will not contain any covenants or provisions
that may afford holders of the Notes protection in the event of a highly
leveraged transaction.

The Credit Facility imposes restrictions on the ability of the Issuer's
Subsidiaries to pay dividends or make distributions to the Issuer. Such
restrictions may limit the ability of the Issuer to fund any purchase of the
Notes upon a Change of Control. There can be no assurance that the Issuer will
be able to fund any purchase of the Notes upon a Change of Control.

BOOK-ENTRY SYSTEM

The Notes will initially be issued in the form of one or more Global
Securities (as defined in the Indenture). Accordingly, DTC or its nominee will
initially be the sole registered holder of the Notes for all purposes under the
Indenture.

Upon the issuance of a Global Security, DTC or its nominee will credit the
accounts of persons holding through it with the respective principal amounts of
the Notes represented by such Global Security purchased by such persons in the
Offering. Such accounts shall be designated by the Underwriters with respect to
Notes placed by the Underwriters for the Issuer. Ownership of beneficial
interests in a Global Security will be limited to persons that have accounts
with DTC ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests by participants in a Global
Security will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by DTC for such Global Security.
Ownership of beneficial interests in such Global Security by persons that hold
through participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.

Payment of principal and interest on Notes represented by any such Global
Security will be made to DTC or its nominee, as the case may be, as the sole
registered owner and the sole holder of the Notes represented thereby for all
purposes under the Indenture. None of the Issuer, the Trustee, any agent of the
Issuer, or the Underwriters will have any responsibility or liability for any
aspect of DTC's records relating to or payments made on account of beneficial
ownership interests in a Global Security representing any Notes or for
maintaining, supervising, or reviewing any of DTC's records relating to such
beneficial ownership interests.

The Issuer has been advised by DTC that upon receipt of any payment of
principal of, or interest on, any Global Security, DTC will immediately credit,
on its book-entry registration and transfer system, the accounts of participants
with payments in amounts proportionate to their respective beneficial interests
in the principal or face amount of such Global Security as shown on the records
of DTC. Payments by participants to owners of beneficial interests in a Global
Security held through such participants will be governed by standing
instructions and customary practices as is now the case with securities held for
customer accounts registered in "street name" and will be the sole
responsibility of such participants.

A Global Security may not be transferred except as a whole by DTC or a
nominee of DTC to a nominee of DTC. A Global Security is exchangeable for
certified Notes only if (i) DTC notifies the Issuer

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that it is unwilling or unable to continue as a depositary for such Global
Security or if at any time DTC ceases to be a clearing agency registered under
the Exchange Act, (ii) the Issuer executes and delivers to the Trustee a notice
that such Global Security shall be so transferable, registrable, and
exchangeable, and such transfers shall be registrable or (iii) there shall have
occurred and be continuing a Default or an Event of Default with respect to the
Notes represented by such Global Security. Any Global Security that is
exchangeable for certificated Notes pursuant to the preceding sentence will be
transferred to, and registered and exchanged for, certificated Notes in
authorized denominations and registered in such names as DTC or any successor
depositary holding such Global Security may direct. Subject to the foregoing, a
Global Security is not exchangeable, except for a Global Security of like
denomination to be registered in the name of DTC or any successor depositary or
its nominee. In the event that a Global Security becomes exchangeable for
certificated Notes, (i) certificated Notes will be issued only in fully
registered form in denominations of $1,000 or integral multiples thereof, (ii)
payment of principal, any repurchase price, and interest on the certificated
Notes will be payable, and the transfer of the certificated Notes will be
registerable, at the office or agency of the Issuer maintained for such purposes
and (iii) no service charge will be made for any registration of transfer or
exchange of the certificated Notes, although the Issuer may require payment of a
sum sufficient to cover any tax or governmental charge imposed in connection
therewith.

So long as DTC or any successor depositary for a Global Security, or any
nominee, is the registered owner of such Global Security, DTC or such successor
depositary or nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by such Global Security for the purposes of
receiving payment on the Notes, receiving notices, and for all other purposes
under the Indenture and the Notes. Beneficial interests in Notes will be
evidenced only by, and transfers thereof will be effected only through, records
maintained by DTC or any successor depositary and its participants. Cede & Co.
has been appointed as the nominee of DTC. Except as provided above, owners of
beneficial interests in a Global Security will not be entitled to and will not
be considered the holders thereof for any purposes under the Indenture.
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of DTC or any successor depositary, and, if such person
is not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder under the
Indenture. The Issuer understands that under existing industry practices, in the
event that the Issuer requests any action of holders or that an owner of a
beneficial interest in a Global Security desires to give or take any action
which a holder is entitled to give or take under the Indenture, DTC or any
successor depositary would authorize the participants holding the relevant
beneficial interest to give or take such action and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.

DTC has advised the Issuer that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered under the
Exchange Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations, and certain other organizations some of whom (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers, and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.

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CERTAIN COVENANTS

LIMITATION ON INDEBTEDNESS. The Issuer shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness;
PROVIDED, HOWEVER, that if after giving pro forma effect to the application of
the proceeds thereof, no Default or Event of Default would occur as a
consequence of such Incurrence or be continuing following such Incurrence, (a)
the Issuer may Incur Indebtedness and Restricted Subsidiaries may borrow or
Guarantee borrowings under the Credit Facility and Incur Indebtedness that is
Vendor Financing, in each case, if on the date of the Incurrence of such
Indebtedness, after giving effect to the Incurrence of such Indebtedness and the
receipt and application of the proceeds thereof, the Leverage Ratio of the
Issuer and the Restricted Subsidiaries (on a consolidated basis) would not
exceed (i) 7.5 from the Issue Date until December 31, 1999 and (ii) 6.0 after
December 31, 1999 and (b) Permitted Indebtedness may be Incurred.

"Permitted Indebtedness" is defined to include any and all of the following:
(i) Indebtedness pursuant to the Credit Facility in an aggregate amount
outstanding at any time not to exceed $75 million; (ii) Indebtedness of the
Issuer evidenced by the Notes; (iii) Indebtedness of the Issuer owing to and
held by a Restricted Subsidiary and Indebtedness of a Restricted Subsidiary
owing to and held by the Issuer or any Restricted Subsidiary; PROVIDED, HOWEVER,
that any event that results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Issuer or a Restricted Subsidiary) shall be deemed, in each case,
to constitute the Incurrence of such Indebtedness by the issuer thereof;
PROVIDED, FURTHER, that any Indebtedness of the Issuer owing to and held by a
Restricted Subsidiary shall be expressly subordinated to the Notes; (iv)
Indebtedness (other than Indebtedness permitted by the immediately preceding
paragraph or elsewhere in this paragraph) in an aggregate principal amount
outstanding at any time not to exceed $15 million; (v) Indebtedness under
Interest Rate Agreements entered into for the purpose of limiting interest rate
risks, PROVIDED, that the obligations under such agreements are related to
payment obligations on Indebtedness otherwise permitted by the terms of this
covenant; (vi) Indebtedness in connection with one or more standby letters of
credit or performance bonds issued in the ordinary course of business or
pursuant to self-insurance obligations and not in connection with the borrowing
of money or the obtaining of advances or credit; (vii) Indebtedness outstanding
on the Issue Date (after giving effect to the application of the proceeds of the
sale of the Debt Offering and the Stock Offering) not otherwise described in
clauses (i) through (vi) above; (viii) Permitted Refinancing Indebtedness
Incurred in respect of Indebtedness Incurred pursuant to clause (a) of the
immediately preceding paragraph and clauses (ii) and (vii) above; and (ix) to
the extent that such Incurrence does not result in the Incurrence by the Issuer
or any Restricted Subsidiary of any obligation for the payment of borrowed money
of others, Indebtedness incurred solely as a result of the execution by the
Issuer or its Restricted Subsidiaries of the Keep-Well Agreement, the Completion
Guarantee and the Capacity Purchase Commitment; PROVIDED, HOWEVER, that the
foregoing exception shall not be applicable to Indebtedness actually Incurred by
the Issuer or any of its Restricted Subsidiaries in connection with the
obligation of the Issuer or its Restricted Subsidiaries to perform under the
Keep-Well Agreement, the Completion Guarantee or the Capacity Purchase
Commitment.

LIMITATION ON INDEBTEDNESS OF ALASKA UNITED PARTNERSHIP. The Issuer shall
not permit Alaska United Partnership or any Subsidiary of Alaska United
Partnership to, directly or indirectly, Incur any Indebtedness other than (i)
Indebtedness under the Fiber Construction Agreements as in effect on the Issue
Date, (ii) Indebtedness of GCI Transport Company owing to and held by the Issuer
or a Restricted Subsidiary and evidencing amounts advanced pursuant to the
Keep-Well Agreement and (iii) Indebtedness (other than Indebtedness permitted
under the preceding clause (i) or (ii)) in an aggregate principal amount
outstanding at any time not to exceed $ , but only if and to the extent
that (a) all principal, interest and other obligations of any kind under such
Indebtedness permitted under this clause (iii) are excluded for all purposes in
determining amounts that may become due and owing pursuant to the Keep-Well
Agreement and (b) such Indebtedness permitted under this clause (iii) is
non-recourse to, and

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the lender thereunder has waived all claims against, the Issuer and its
Restricted Subsidiaries and their respective Properties and assets with respect
thereto.

LIMITATION ON RESTRICTED PAYMENTS. The Issuer shall not make, and shall not
permit any Restricted Subsidiary to make, directly or indirectly, any Restricted
Payment if at the time of, and after giving effect to, such proposed Restricted
Payment, (a) a Default or an Event of Default shall have occurred and be
continuing, (b) the Issuer could not Incur at least $1.00 of additional
Indebtedness pursuant to clause (a) of the first paragraph of "--Limitation on
Indebtedness" or (c) the aggregate amount of such Restricted Payment and all
other Restricted Payments made since the Issue Date (the amount of any
Restricted Payment, if made other than in cash, to be based upon Fair Market
Value) would exceed an amount equal to the sum of (i) the excess of (A)
Cumulative EBITDA over (B) the product of 1.5 and Cumulative Interest Expense,
(ii) Capital Stock Sale Proceeds, (iii) the amount by which Indebtedness of the
Issuer or any Restricted Subsidiary is reduced on the Issuer's balance sheet
upon the conversion or exchange (other than by a Subsidiary of the Issuer)
subsequent to the Issue Date of any Indebtedness of the Issuer or any Restricted
Subsidiary convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Issuer (less the amount of any cash or other Property
distributed by the Issuer or any Restricted Subsidiary upon conversion or
exchange) and (iv) an amount equal to the net reduction in Investments made by
the Issuer and its Restricted Subsidiaries subsequent to the Issue Date in any
Person resulting from (A) dividends, repayment of loans or advances, or other
transfers or distributions of Property (but only to the extent the Issuer
excludes such transfers or distributions from the calculation of Cumulative
EBITDA for purposes of clause (c)(i)(A) above), in each case to the Issuer or
any Restricted Subsidiary from any Person or (B) the redesignation of any
Unrestricted Subsidiary as a Restricted Subsidiary, not to exceed, in the case
of (A) or (B) of this subclause (iv), the amount of such Investments previously
made by the Issuer and its Restricted Subsidiaries in such Person or such
Unrestricted Subsidiary, as the case may be, which were treated as Restricted
Payments.

Notwithstanding the foregoing limitation, the Issuer may (a) pay dividends
on its Capital Stock within 60 days of the declaration thereof if, on the
declaration date, such dividends could have been paid in compliance with the
Indenture, (b) redeem, repurchase, defease, acquire or retire for value, any
Indebtedness subordinate (whether pursuant to its terms or by operation of law)
in right of payment to the Notes with the proceeds of any Indebtedness that is
Permitted Refinancing Indebtedness in respect of such subordinated Indebtedness,
(c) acquire, redeem or retire Capital Stock of the Issuer or Indebtedness
subordinate (whether pursuant to its terms or by operation of law) in right of
payment to the Notes in exchange for, or in connection with a substantially
concurrent issuance of, Capital Stock of the Issuer (other than Disqualified
Stock and other than Capital Stock issued or sold to a Subsidiary of the Issuer
or an employee stock ownership plan or other trust established by the Issuer or
any Subsidiary of the Issuer), (d) make Investments in Persons the primary
businesses of which are Related Businesses (other than Investments in the
Capital Stock of the Issuer) in an amount at any time outstanding not to exceed
in the aggregate for all such Investments made in reliance upon this clause (d),
the sum of (i) $35 million and (ii) an amount equal to the net reduction in
Investments made by the Issuer and its Restricted Subsidiaries subsequent to the
Issue Date in any Person resulting from payments of dividends, repayment of
loans or advances, or other transfers or distributions of Property (to the
extent not included in EBITDA) to the Issuer or any Restricted Subsidiary from
any Person (but only to the extent such net reduction in Investments has not
been utilized to permit a Restricted Payment pursuant to clause (c)(i) or
(c)(iv) in the immediately preceding paragraph) not to exceed, in the case of
clause (d)(ii), the amount of such Investments previously made by the Issuer and
its Restricted Subsidiaries in such Person which were treated as Restricted
Payments, (e) execute the Completion Guarantee, the Keep-Well Agreement and the
Capacity Purchase Commitment; PROVIDED, HOWEVER, any funding of the Completion
Guarantee or the Keep-Well Agreement or any purchase of Unused Capacity under
the Capacity Purchase Commitment may only be made if it complies with the
immediately preceding paragraph or clause (d) in this paragraph and such funding
or purchases shall count as Restricted Payments for purposes of determining such
compliance, (f) purchase or redeem Capital Stock in connection with the
repurchase provisions

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under employee stock option or stock purchase agreements or other agreements to
compensate management employees of Parent, the Issuer or one of its
Subsidiaries; PROVIDED, HOWEVER, that the amount paid in connection with all
such redemptions or repurchases pursuant to this clause (f) shall not exceed in
any fiscal year $2 million in the aggregate, and (g) assign or otherwise
transfer to GCI Transport Company, or any of its Subsidiaries the credit in
favor of the Issuer and all other related rights arising from the Issuer's $9.1
million deposit made in connection with the Galaxy X Agreement.

Any payments made pursuant to clauses (b), (c) and (g) of the immediately
preceding paragraph shall be excluded from the calculation of the aggregate
amount of Restricted Payments made after the Issue Date; PROVIDED, HOWEVER, that
the proceeds from the issuance of Capital Stock pursuant to clause (c) of the
immediately preceding paragraph shall not constitute Capital Stock Sale Proceeds
for purposes of clause (c)(ii) of the first paragraph of this covenant. The
Issuer may, at the time of any Restricted Payment, designate, by delivery to the
Trustee of an Officers' Certificate referencing this covenant and such
designation, whether such Restricted Payment is being made in accordance with
the second preceding paragraph or, if applicable, the clause of the preceding
paragraph pursuant to which such Restricted Payment is being made.

LIMITATION ON LIENS. The Issuer shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any
Lien (other than Permitted Liens) upon any of its Property, whether now owned or
hereafter acquired, or any interest therein, or any income or profits therefrom,
unless (a) with respect to any Restricted Subsidiary, such Lien secures
Indebtedness other than Guarantees of Indebtedness of the Issuer or (b)
effective provision has been or will be made whereby the Notes will be secured
by such Lien equally and ratably with all other Indebtedness of the Issuer or
any Restricted Subsidiary secured by such Lien; PROVIDED, HOWEVER, that no Lien
may be granted with respect to Indebtedness of the Issuer that is subordinated
to the Notes.

LIMITATION ON ASSET SALES. The Issuer shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale
after the Issue Date unless (i) the Issuer or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the Property subject to such Asset Sale and
(ii) (A) at least 80% of the consideration paid to the Issuer or such Restricted
Subsidiary in connection with such Asset Sale is in the form of cash or cash
equivalents or (B) the consideration paid to the Issuer or such Restricted
Subsidiary is determined in good faith by the Board of Directors of Parent and
the Issuer, as evidenced by a Board Resolution, to be substantially comparable
in type to the assets being sold; PROVIDED, HOWEVER, this clause (ii) shall not
apply to any sales of property or equipment that have become worn out, obsolete
or damaged or otherwise unsuitable for use in connection with the business of
the Issuer or any Restricted Subsidiary, as the case may be.

The Net Available Cash (or any portion thereof) from Asset Sales may be
applied by the Issuer or a Restricted Subsidiary, (A) to prepay, repay or
purchase Indebtedness under the Credit Facility or Indebtedness of a Restricted
Subsidiary (excluding Indebtedness owed to the Issuer or an Affiliate of the
Issuer); or (B) to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Issuer or another Restricted Subsidiary).

Any Net Available Cash from an Asset Sale not applied in accordance with the
preceding paragraph within one year from the date of such Asset Sale or the
receipt of such Net Available Cash shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10 million (taking into account
income earned on such Excess Proceeds), the Issuer will be required to make an
offer to purchase (the "Prepayment Offer") the Notes, and any other
Indebtedness, if any, that ranks PARI PASSU with the Notes and contains similar
provisions requiring an Asset Sale prepayment offer, on a pro rata basis, at a
purchase price equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon (if any) to the date of purchase in accordance with the
procedures (including prorating in

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the event of oversubscription) set forth in the Indenture (or, in the event of
Indebtedness that is discounted, at a price of the then accreted value thereof);
PROVIDED, HOWEVER, if any other such Indebtedness that ranks PARI PASSU with the
Notes does not contain similar Asset Sale prepayment offer provisions with
regard to the pro rata repayment of such other Indebtedness and the Notes, the
Issuer will be required to purchase the Notes before purchasing any other such
Indebtedness from such Excess Proceeds. If the aggregate principal amount of
Notes surrendered for purchase by holders thereof exceeds the amount of Excess
Proceeds allocated to the Notes, then the Trustee shall select the Notes to be
purchased pro rata according to principal amount or by lot with such adjustments
as may be deemed appropriate by the Issuer so that only Notes in denominations
of $1,000, or integral multiples thereof, shall be purchased. To the extent that
any portion of the amount of Net Available Cash remains after compliance with
the preceding sentence and, PROVIDED that all holders of Notes have been given
the opportunity to tender their Notes for purchase as described in the following
paragraph in accordance with the Indenture, the Issuer or such Restricted
Subsidiary may use such remaining amount for general corporate purposes and the
amount of Excess Proceeds will be reset to zero.

Within five Business Days after one year from the date of an Asset Sale or
the receipt of Net Available Cash therefrom, the Issuer shall, if it is
obligated to make a Prepayment Offer, send a written notice, by first-class
mail, to the holders of the Notes (the "Prepayment Offer Notice"), accompanied
by such information regarding the Issuer and its Subsidiaries as the Issuer in
good faith believes will enable such holders of the Notes to make an informed
decision with respect to the Prepayment Offer. The Prepayment Offer Notice will
state, among other things, (a) that the Issuer is offering to purchase Notes
pursuant to the provisions of the Indenture described herein under "Limitation
on Asset Sales," (b) that any Note (or any portion thereof) accepted for payment
(and duly paid on the Purchase Date (defined below)) pursuant to the Prepayment
Offer shall cease to accrue interest after the Purchase Date, (c) the purchase
price and purchase date, which shall be, subject to any contrary requirements of
applicable law, no less than 30 days nor more than 60 days from the date the
Prepayment Offer Notice is mailed (the "Purchase Date"), (d) the aggregate
principal amount of Notes (or portions thereof) to be purchased and (e) a
description of the procedure which holders of Notes must follow in order to
tender their Notes (or portions thereof) and the procedures that holders of
Notes must follow in order to withdraw an election to tender their Notes (or
portions thereof) for payment.

The Issuer will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws or regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of Notes as described above. To the extent that the provisions
of any securities laws or regulations conflict with the provisions relating to
the Prepayment Offer, the Issuer will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations
described above by virtue thereof.

LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective, or enter into any agreement with any Person that
would cause to become effective, any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, or pay any Indebtedness or other obligation owed, to the Issuer or any
other Restricted Subsidiary, (b) make any loans or advances to the Issuer or any
other Restricted Subsidiary or (c) transfer any of its Property to the Issuer or
any other Restricted Subsidiary. Such limitation will not apply (1) with respect
to clauses (a), (b) and (c), to encumbrances and restrictions (i) in existence
under or by reason of any agreements (not otherwise described in clause (iii))
in effect on the Issue Date, (ii) relating to Indebtedness of a Restricted
Subsidiary and existing at such Restricted Subsidiary at the time it became a
Restricted Subsidiary if such encumbrance or restriction was not created in
connection with or in anticipation of the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Issuer, (iii) any encumbrance or

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restriction pursuant to (x) the Credit Facility as in effect on the Issue Date
and (y) any agreement which amends, extends, revises, refinances or replaces the
Credit Facility, PROVIDED, HOWEVER, that in the case of this subclause (y), such
restrictions or encumbrances are no less favorable to the holders of the Notes
than those restrictions or encumbrances pursuant to the Credit Facility as in
effect on the Issue Date; PROVIDED, FURTHER, HOWEVER, that the provisions of the
Credit Facility (A) permit distributions to the Issuer for the purpose of, and
in an amount sufficient to fund, the payment of principal due at maturity and
interest in respect of the Notes (PROVIDED, in either case, that such payment is
due or to become due within 30 days from the date of such distribution) at a
time when there does not exist an event which after notice or passage of time or
both would permit the lenders under the Credit Facility to declare all amounts
thereunder due and payable, and (B) provide that in no event shall any
encumbrance or restriction pursuant to the Credit Facility prohibit
distributions for Indebtedness on the Notes for more than 180 days in any
consecutive 360 day period, unless the maturity of the Credit Facility has been
accelerated, or (iv) which result from the renewal, refinancing, extension or
amendment of an agreement referred to in the immediately preceding clauses
(1)(i) and (ii) above and in clauses (2)(i) and (ii) below, PROVIDED, such
encumbrance or restriction is no more restrictive to such Restricted Subsidiary
and is not materially less favorable to the holders of Notes than those under or
pursuant to the agreement evidencing the Indebtedness so extended, renewed,
refinanced or replaced, and (2) with respect to clause (c) only, to (i) any
encumbrance or restriction relating to Indebtedness that is permitted to be
Incurred and secured pursuant to the provisions under "--Limitation on
Indebtedness" and "--Limitation on Liens" that limits the right of the debtor to
dispose of the assets or Property securing such Indebtedness, (ii) any
encumbrance or restriction in connection with an acquisition of Property, so
long as such encumbrance or restriction relates solely to the Property so
acquired and was not created in connection with or in anticipation of such
acquisition, (iii) customary provisions restricting subletting or assignment of
leases of the Issuer or any Restricted Subsidiary and customary provisions in
other agreements that restrict assignment of such agreements or rights
thereunder or (iv) customary restrictions contained in asset sale agreements
limiting the transfer of such assets pending the closing of such sale.

LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Issuer shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, conduct any
business or enter into or suffer to exist any transaction or series of
transactions (including the purchase, sale, transfer, lease or exchange of any
Property or the rendering of any service) with, or for the benefit of, any
Affiliate of the Issuer (an "Affiliate Transaction") unless (a) the terms of
such Affiliate Transaction are (i) set forth in writing, (ii) in the best
interest of the Issuer or such Restricted Subsidiary, as the case may be, and
(iii) no less favorable to the Issuer or such Restricted Subsidiary, as the case
may be, than those that could be obtained in a comparable arm's-length
transaction with a Person that is not an Affiliate of the Issuer or such
Restricted Subsidiary, (b) with respect to an Affiliate Transaction involving
aggregate payments or value in excess of $15 million, the Board of Directors of
Parent and the Issuer (including a majority of the disinterested members of the
Board of Directors of Parent and the Issuer) approves such Affiliate Transaction
and, in its good faith judgment, believes that such Affiliate Transaction
complies with clauses (a) (ii) and (iii) of this paragraph as evidenced by a
Board Resolution and (c) with respect to an Affiliate Transaction involving
aggregate payments or value in excess of $25 million, the Issuer obtains a
written opinion from an independent appraisal firm to the effect that such
Affiliate Transaction is fair, from a financial point of view.

Notwithstanding the foregoing limitation, the Issuer may enter into or
suffer to exist the following: (i) any transaction pursuant to any contract in
existence on the Issue Date on the terms of such contract as in effect on the
Issue Date; (ii) any transaction or series of transactions between the Issuer
and one or more of its Restricted Subsidiaries or between two or more of its
Restricted Subsidiaries; (iii) any Restricted Payment permitted to be made
pursuant to "--Limitation on Restricted Payments"; (iv) the payment of
compensation (including, amounts paid pursuant to employee benefit plans) for
the personal services of officers, directors and employees of Parent, the Issuer
or any of its Restricted Subsidiaries, so long as the Board of Directors of
Parent and the Issuer in good faith shall have approved the

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terms thereof and deemed the services theretofore or thereafter to be performed
for such compensation or fees to be fair consideration therefor; (v) loans and
advances to employees of Parent, the Issuer or a Restricted Subsidiary made in
the ordinary course of business and consistent with past practice of Parent, the
Issuer or such Restricted Subsidiary, as the case may be, provided, that such
loans and advances do not exceed in the aggregate $5 million at any one time
outstanding; (vi) any transaction pursuant to any Fiber Construction Agreement,
(vii) any transaction pursuant to the Galaxy X Agreement and (viii) any
transaction on or promptly following the Issue Date and described above under
"Use of Proceeds."

OWNERSHIP OF SIGNIFICANT SUBSIDIARIES. The Issuer will at all times
maintain, either directly or indirectly, 100% ownership of the Capital Stock of
any Person that is or becomes a Significant Subsidiary of the Issuer; PROVIDED,
HOWEVER, that (i) the Issuer may, directly or indirectly, acquire after the
Issue Date and thereafter maintain ownership comprising less than 100% of the
Capital Stock of such Person provided such acquisition is otherwise effected in
accordance with the terms of the Indenture and (ii) the Issuer may transfer,
convey, sell or otherwise dispose of all or substantially all of the assets of a
Significant Subsidiary as permitted pursuant to "--Limitation on Asset Sales."

AMENDMENT OF FIBER CONSTRUCTION AGREEMENTS. The Issuer shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, amend, supplement
or otherwise modify any term or condition of any Fiber Construction Agreement in
any manner that, directly or indirectly, increases or adversely affects any
obligation or contingent obligation of the Issuer or any of its Restricted
Subsidiaries under the Completion Guarantee, the Keep-Well Agreement, the
Capacity Lease, the Capacity Purchase Commitment or any other agreement or
arrangement executed or delivered in connection with the Fiber Construction
Agreements or the transactions contemplated thereby.

OPERATION OF UNRESTRICTED SUBSIDIARIES. The Issuer shall cause each of its
Unrestricted Subsidiaries (i) to maintain continuously articles or a certificate
of incorporation or, in the case of a partnership, a partnership agreement,
providing that (a) such Unrestricted Subsidiary's purpose is limited and, in the
case of Alaska United Partnership, that such purpose is limited to conducting
the business contemplated by the Fiber Construction Agreements, (b) such
Unrestricted Subsidiary is prohibited from engaging in any dissolution,
liquidation, merger, consolidation or sale, transfer, assignment, lease,
conveyance or other disposal of all or substantially all of its Property in any
one transaction or series of transactions as long as any Indebtedness under the
Fiber Construction Facility remains outstanding, other than (1) any such
transaction with or into the Issuer or any of its Restricted Subsidiaries
otherwise effected in accordance with the terms of the Indenture, (2) any such
transaction with or into another Unrestricted Subsidiary and (3) any such
transaction which, assuming for purposes of this clause (3) only that such
Unrestricted Subsidiary were a Restricted Subsidiary, would comply with the
covenant entitled "Limitation on Asset Sales;" provided, however, that any Net
Available Cash derived therefrom may also be used to prepay, repay or purchase
Indebtedness under the Fiber Construction Facility and (c) the board of
directors of such Unrestricted Subsidiary or, in the case of a partnership, of
the corporate general partner of such partnership, shall consist of not less
than one independent director; (ii) to maintain separate books and records
including, without limitation, separate financial statements; (iii) not to
commingle any of its properties or assets with the properties or assets of the
Issuer or any Restricted Subsidiary; (iv) to pay its liabilities, the salaries
of its employees and all consultant and advisor fees and expenses directly out
of funds that do not comprise in whole or in part the funds of the Issuer or any
of its Restricted Subsidiaries and (v) otherwise to hold itself out as a
separate entity.

MERGER, CONSOLIDATION AND SALE OF ASSETS

The Issuer will not merge or consolidate with or into any other entity
(other than a merger of a wholly owned Restricted Subsidiary into the Issuer) or
sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all of its Property in any one transaction or series of
transactions unless: (a) the

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entity formed by or surviving any such consolidation or merger (if the Issuer is
not the surviving entity) or the Person to which such sale, transfer,
assignment, lease or conveyance is made (the "Surviving Entity") shall be a
corporation organized and existing under the laws of the United States of
America or a State thereof or the District of Columbia and such corporation
expressly assumes, by supplemental indenture in form satisfactory to the
Trustee, executed and delivered to the Trustee by such corporation, the due and
punctual payment of the principal of, premium, if any, and interest on all the
Notes, according to their tenor, and the due and punctual performance and
observance of all the covenants and conditions of the Indenture to be performed
by the Issuer; (b) immediately before and after giving effect to such
transaction or series of transactions, no Default or Event of Default shall have
occurred and be continuing; (c) immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness Incurred or anticipated to be Incurred in
connection with such transaction or series of transactions), the Issuer or the
Surviving Entity, as the case may be, would be able to Incur at least $1.00 of
additional Indebtedness under clause (a) of the first paragraph of "--Certain
Covenants--Limitation on Indebtedness;" and (d) in the case of a sale, transfer,
assignment, lease, conveyance or other disposition of all or substantially all
of the Issuer's Property, such Property shall have been transferred as an
entirety or virtually as an entirety to one Person.

In connection with any consolidation, merger or transfer contemplated by
this provision, the Issuer shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and the supplemental indenture in respect
thereof comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.

SEC REPORTS

Notwithstanding that the Issuer may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Issuer
shall file with the Commission and provide the Trustee and holders of the Notes
with such annual reports and such information, documents and other reports as
are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections; such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections.

EVENTS OF DEFAULT

Events of Default in respect of the Notes as set forth in the Indenture
include: (i) failure to make the payment of any principal of, or premium, if
any, on any of the Notes when the same becomes due and payable at maturity, upon
acceleration, redemption, optional redemption, required purchase or otherwise;
(ii) failure to make the payment of any interest on the Notes when the same
becomes due and payable, and such failure continues for a period of 30 days;
(iii) failure to comply with any other covenant or agreement in the Notes or in
the Indenture and such failure continues for 30 days after written notice from
the Trustee or the registered holders of not less than 25% in aggregate
principal amount of the Notes then outstanding; (iv) a default under any
Indebtedness for borrowed money by the Issuer or any Restricted Subsidiary which
results in acceleration of the maturity of such Indebtedness, or failure to pay
any such Indebtedness when due within any applicable grace period, in a total
amount greater than $15 million (the "Cross Acceleration Provisions"); (v) any
judgment or judgments for the payment of money in an uninsured aggregate amount
in excess of $15 million shall be rendered against the Issuer or any Restricted
Subsidiary and shall not be waived, satisfied or discharged for any period of 30
consecutive days during which a stay of enforcement shall not be in effect (the
"Judgment Default Provisions"); and (vi) certain events involving bankruptcy,
insolvency or reorganization of the Issuer or any Restricted Subsidiary (the
"Bankruptcy Provisions"). The Indenture provides that the Trustee may withhold
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the holders of the Notes notice of any Default (other than payment Defaults) if
the Trustee considers it to be in the best interest of the holders of the Notes
to do so.

The Indenture will provide that if an Event of Default with respect to the
Notes (other than an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization with respect to the Issuer or any
Restricted Subsidiary) shall have occurred and be continuing, the Trustee or the
registered holders of not less than 25% in aggregate principal amount of the
Notes then outstanding may declare to be immediately due and payable the
principal amount of all the Notes then outstanding, plus accrued but unpaid
interest to the date of acceleration; PROVIDED, HOWEVER, that after such
acceleration but before a judgment or decree based on acceleration is obtained
by the Trustee, the registered holders of a majority in aggregate principal
amount of the Notes then outstanding, may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the nonpayment
of accelerated principal, premium or interest, have been cured or waived as
provided in the Indenture. In case an Event of Default resulting from certain
events of bankruptcy, insolvency or reorganization with respect to the Issuer or
a Restricted Subsidiary shall occur, such amount with respect to all of the
Notes shall be due and payable immediately without any declaration or other act
on the part of the Trustee or the holders of the Notes.

The registered holders of a majority in principal amount of the Notes then
outstanding shall have the right to waive any existing Default, other than
payment Defaults, with respect to the Notes or compliance with any provision of
the Indenture and to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, subject to certain
limitations specified in the Indenture.

No holder of the Notes will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless (i) such holder
shall have previously given to the Trustee written notice of a continuing Event
of Default, (ii) the registered holders of at least 25% in aggregate principal
amount of the Notes then outstanding shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as a trustee,
(iii) the Trustee shall not have received from the registered holders of a
majority in aggregate principal amount of the Notes then outstanding a direction
inconsistent with such request, and (iv) the Trustee shall have failed to
institute such proceeding within 60 days; PROVIDED, HOWEVER, such limitations do
not apply to a suit instituted by a holder of any Note for enforcement of
payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note.

AMENDMENTS AND WAIVERS

The Indenture may be amended with the consent of the registered holders of a
majority in principal amount of the Notes to be affected then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes) and any past Default, other than payment Defaults, or compliance
with any provisions may also be waived with the consent of the registered
holders of a majority in principal amount of the Notes to be affected then
outstanding; PROVIDED, HOWEVER, without the consent of each holder of an
outstanding Note to be affected, no amendment may, among other things, (i)
reduce the amount of Notes whose holders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest on any Note, (iii)
reduce the principal of or extend the Stated Maturity of any Note, (iv) make any
Note payable in money other than that stated in the Note, (v) impair the right
of any holder of the Notes to receive payment of principal of and interest on
such holder's Notes on or after the due dates therefor or to institute suit for
the enforcement of any payment on or with respect to such holder's Notes, (vi)
modify or change any provision of the Indenture or the related definitions
affecting the ranking of the Notes in a manner which adversely affects the
holders of the Notes, (vii) make any change in the amendment provisions which
require each holder's consent or in the waiver provisions or (viii) reduce the
premium payable upon the redemption of any Note or change the time at which any
Note may or shall be redeemed as described under "Optional Redemption."

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Without the consent of any holder of the Notes, the Issuer and the Trustee
may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Issuer under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (PROVIDED that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Internal Revenue Code of 1986, as amended (the "Code"), or in a
manner such that the uncertificated Notes are described in Section 163(f)(2)(B)
of the Code), to add Guarantees with respect to the Notes, to secure the Notes,
to add to the covenants of the Issuer for the benefit of the holders of the
Notes or to surrender any right or power conferred upon the Issuer, to make any
change that does not adversely affect the rights of any holder of the Notes or
to comply with any requirement of the Commission in connection with the
qualification of the Indenture under the Trust Indenture Act.

The consent of the holders of the Notes is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.

After an amendment under the Indenture becomes effective, the Issuer is
required to mail to registered holders of the Notes affected a notice briefly
describing such amendment. However, the failure to give such notice to all
holders of the Notes, or any defect therein, will not impair or affect the
validity of the amendment.

DEFEASANCE

The Issuer at any time may terminate all its obligations under the Notes and
the Indenture ("Legal Defeasance"), except for certain obligations, including
those respecting the Defeasance Trust (defined below) and obligations to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes. The Issuer at any time may terminate its obligations under the
covenants described under "--Certain Covenants" (other than the covenant
described under "--Merger, Consolidation and Sale of Assets"), the operation of
the Cross Acceleration Provisions, the Bankruptcy Provisions with respect to
Restricted Subsidiaries and the Judgment Default Provisions described under
"--Events of Default" above and the limitations contained in clause (c) under
"--Certain Covenants--Merger, Consolidation and Sale of Assets" above ("Covenant
Defeasance").

The Issuer may exercise its Legal Defeasance option notwithstanding its
prior exercise of its Covenant Defeasance option. If the Issuer exercises its
Legal Defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Issuer exercises its Covenant
Defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii)(with respect to the covenants
described under "--Certain Covenants," other than the covenant described under
"--Merger, Consolidation and Sale of Assets" above), clause (iv), (v) or (vi)
(with respect only to Restricted Subsidiaries) under "--Events of Default" above
or because of the failure of the Issuer to comply with clause (c) under
"--Merger, Consolidation and Sale of Assets" above.

In order to exercise either its Legal Defeasance or Covenant Defeasance
option, the Issuer must irrevocably deposit in trust (the "Defeasance Trust")
with the Trustee money or U.S. Government Obligations for the payment of
principal and interest on the Notes to maturity or an earlier redemption in
accordance with the terms of the Indenture and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes of such series will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in

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the case of Legal Defeasance only, such Opinion of Counsel must be based on a
ruling of the Internal Revenue Service or other change in applicable federal
income tax law).

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.

"ADDITIONAL ASSETS" means (i) any Property (other than cash, cash
equivalents or securities) to be owned by the Issuer or a Restricted Subsidiary
and used in a Related Business, (ii) the costs of improving or developing any
Property owned by the Issuer or a Restricted Subsidiary which is used in a
Related Business and (iii) Investments in any other Person engaged primarily in
a Related Business (including the acquisition from third parties of Capital
Stock of such Person) as a result of which such other Person becomes a
Restricted Subsidiary or is merged or consolidated with or into the Issuer or
any Restricted Subsidiary.

"AFFILIATE" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person who is a director or
executive officer (a) of such specified Person, (b) of any Subsidiary of such
specified Person or (c) of any Person described in clause (i) above. For the
purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. "Affiliate" shall also mean any beneficial owner
of shares representing 10% or more of the total voting power of the Voting Stock
(on a fully diluted basis) of the Issuer or of rights or warrants to purchase
such Voting Stock (whether or not currently exercisable) and any Person who
would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof.

"ASSET SALE" means, with respect to any Person, any transfer, conveyance,
sale, lease or other disposition (including, without limitation, dispositions
pursuant to any consolidation or merger or a Sale and Leaseback Transaction) by
such Person or any of its Subsidiaries (or, in the case of the Issuer, its
Restricted Subsidiaries) in any single transaction or series of transactions of
(a) shares of Capital Stock or other ownership interests in another Person
(including, with respect to the Issuer and its Restricted Subsidiaries, Capital
Stock of Unrestricted Subsidiaries) or (b) any other Property of such Person or
any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that the term "Asset
Sale" shall not include: (i) the sale or transfer of Temporary Cash Investments,
inventory, accounts receivable or other Property (including, without limitation,
the lease of excess satellite transponder capacity and the lease of excess fiber
capacity) in the ordinary course of business; (ii) the liquidation of Property
received in settlement of debts owing to such Person or any of its Restricted
Subsidiaries as a result of foreclosure, perfection or enforcement of any Lien
or debt, which debts were owing to such Person or any of its Restricted
Subsidiaries in the ordinary course of business, (iii) when used with respect to
the Issuer, any asset disposition permitted pursuant to "--Merger, Consolidation
and Sale of Assets" which constitutes a disposition of all or substantially all
of the Issuer's Property; (iv) the sale or transfer of any Property by such
Person or any of its Restricted Subsidiaries to such Person or any of its
Restricted Subsidiaries; (v) a disposition in the form of a Restricted Payment
permitted to be made pursuant to "--Certain Covenants--Limitation on Restricted
Payments;" or (vi) a disposition (taken together with any other dispositions in
a single transaction or series of related transactions) with a Fair Market Value
and a sale price of less than $5 million.

"ATTRIBUTABLE INDEBTEDNESS" means Indebtedness deemed to be incurred in
respect of a Sale and Leaseback Transaction and shall be, at the date of
determination, the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually), of the total

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obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Leaseback Transaction (including any period for
which such lease has been extended).

"AVERAGE LIFE" means, as of the date of determination, with respect to any
security, the quotient obtained by dividing (i) the sum of the products of the
numbers of years (rounded to the nearest one-twelfth of one year) from the date
of determination to the dates of each successive scheduled principal or other
redemption payment of such security multiplied by the amount of such payment by
(ii) the sum of all such payments.

"BOARD RESOLUTION" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of Parent and the Issuer to have been duly adopted by
the Board of Directors of Parent and the Issuer, to be in full force and effect
on the date of such certification and delivered to the Trustee.

"CAPACITY LEASE" means the Sponsor Lease Contract dated , 1997
by and among a Restricted Subsidiary and Alaska United Partnership pursuant to
which such Restricted Subsidiary agrees to lease up to 45% of the output
capacity of the System at the rates set forth in such lease contract as in
effect on the Issue Date, as such lease contract may otherwise be amended,
supplemented or otherwise modified in accordance with the terms thereof and of
the Indenture.

"CAPACITY PURCHASE COMMITMENT" means the Conditional Capacity Purchase
Obligation dated , 1997 by and among a Restricted Subsidiary and
Alaska United Partnership pursuant to which such Restricted Subsidiary agrees to
lease certain output capacity of the System commencing on the fifth anniversary
of the initial drawdown under the Fiber Construction Facility, at the rates set
forth in such Capacity Purchase Commitment as in effect on the Issue Date, as
such commitment may otherwise be amended, supplemented or otherwise modified in
accordance with the terms thereof and of the Indenture.

"CAPITAL LEASE OBLIGATIONS" means Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP and the amount of such Indebtedness shall be
the capitalized amount of such obligations determined in accordance with GAAP.

"CAPITAL STOCK" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership interests
or any other participation, right, warrant, option or other interest in the
nature of an equity interest in such Person, but excluding any debt security
convertible or exchangeable into such equity interest.

"CAPITAL STOCK SALE PROCEEDS" means the aggregate Net Cash Proceeds received
by the Issuer from the issue or sale (other than to a Subsidiary of the Issuer
or an employee stock ownership plan or trust established by the Issuer or any
Subsidiary of the Issuer) by the Issuer of any class of its Capital Stock (other
than Disqualified Stock) after the Issue Date.

"CHANGE OF CONTROL" means the occurrence of any of the following events: (i)
any "person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of
the Exchange Act or any successor provision to either of the foregoing,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b) (1) under the Exchange Act) other
than one or more of the Permitted Holders, or an entity or entities controlled
by one or more of the Permitted Holders, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
40% or more of the total voting power of the Voting Stock (on a fully diluted
basis) of Parent or the Issuer, (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of Parent or the Issuer (together with any new directors whose
election by the Board of Directors of Parent or the Issuer, as the case may be,
or whose nomination for election by the shareholders of Parent or the Issuer, as
the case may be, was approved by a majority vote of the directors of Parent or
the Issuer, as the case may be, then still in office who were either directors
at the beginning of such period or whose election or nomination for election was

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previously so approved) cease for any reason to constitute a majority of the
Board of Directors of Parent or the Issuer, as the case may be, then in office,
(iii) the Issuer consolidates or merges with or into any other Person (other
than one or more Permitted Holders or an entity or entities controlled by one or
more Permitted Holders) or any other Person (other than one or more Permitted
Holders or an entity or entities controlled by one or more Permitted Holders)
consolidates or merges with or into the Issuer, in either case, other than (a) a
consolidation or merger with a wholly owned Restricted Subsidiary in which all
of the Voting Stock of the Issuer outstanding immediately prior to the
effectiveness thereof is changed into or exchanged for substantially the same
consideration or (b) a consolidation or merger with or into Parent or (iv) the
Issuer sells, conveys, transfers or leases, directly or indirectly, all or
substantially all of its assets (other than a transfer of such assets as an
entirety or virtually as an entirety to a wholly owned Restricted Subsidiary,
Parent, one or more Permitted Holders or an entity or entities controlled by one
or more Permitted Holders).

"COMPLETION GUARANTEE" means the Completion Guarantee dated ,
1997 between a Restricted Subsidiary and pursuant
to which the Issuer or one of its Restricted Subsidiaries agreed to advance
funds in an aggregate amount not to exceed $ million, directly or indirectly,
to a Fiber Construction Facility Obligor for completion of construction of the
System, as the same may be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof and of the Indenture.

"CONSOLIDATED INTEREST EXPENSE" means, for any Person (or in the case of the
Issuer, the Issuer and its Restricted Subsidiaries), for any period, the amount
of interest in respect of Indebtedness (including amortization of original issue
discount, fees payable in connection with financings, including commitment,
availability and similar fees, and amortization of debt issuance costs, non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under, and the net costs associated with, any Interest Rate Agreement, however
denominated, with respect to such Indebtedness), the amount of dividends in
respect of Disqualified Stock paid by the Issuer and the Restricted
Subsidiaries, the amount of Preferred Stock dividends in respect of all
Preferred Stock of Subsidiaries of such Person held other than by such Person or
a Subsidiary (other than any Unrestricted Subsidiary) of such Person,
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, and the interest component of
rentals in respect of any Capital Lease Obligation or Sale and Leaseback
Transaction paid, accrued or scheduled to be paid or accrued by such Person
during such period, determined on a consolidated basis in accordance with GAAP.
For purposes of this definition, interest on a Capital Lease Obligation or a
Sale and Leaseback Transaction shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in such
Capital Lease Obligation or Sale and Leaseback Transaction in accordance with
GAAP consistently applied.

"CONSOLIDATED NET INCOME" of a Person means for any period, the net income
(loss) of such Person and its Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income (i) with respect to the Issuer,
any net income (loss) of any Person if such Person is not a Restricted
Subsidiary, except that (a) subject to the limitations contained in clause (iv)
below, the Issuer's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such period to the Issuer or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (b) the Issuer's equity in a
net loss of any such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net Income, (ii) any
net income (loss) of any Person acquired by such Person or a Subsidiary of such
Person in a pooling of interests transaction for any period prior to the date of
such acquisition, (iii) with respect to the Issuer, any net income (loss) of any
Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly,

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to the Issuer, except that (a) subject to the limitations contained in clause
(iv) below, the Issuer's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Issuer or another Restricted
Subsidiary as a dividend (subject, in the case of a dividend to another
Restricted Subsidiary, to the limitation contained in this clause) and (b) the
Issuer's equity in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net Income, (iv) any gains or
losses realized upon the sale or other disposition of any Property of such
Person or its consolidated Subsidiaries (including pursuant to any Sale and
Leaseback Transaction) which is not sold or otherwise disposed of in the
ordinary course of business, (v) any extraordinary gain or loss and (vi) the
cumulative effect of a change in accounting principles.

Notwithstanding the provisions of clause (iii) in the preceding paragraph,
in the event that Consolidated Net Income is being calculated with respect to
the Issuer or any Surviving Entity (a) for purposes of determining whether the
Issuer or any Surviving Entity could incur at least $1.00 of additional
Indebtedness pursuant to clause (a) of the first paragraph of "--Certain
Covenants--Limitation on Indebtedness" for purposes of (i) clause (b) of the
first sentence under "--Certain Covenants--Limitation on Restricted Payments,"
(ii) clause (c) under "--Merger, Consolidation and Sale of Assets" or (iii) the
definition of "Unrestricted Subsidiary" or (b) for purposes of calculating
Cumulative EBITDA pursuant to clause (c) of the first sentence of "--Certain
Covenants--Limitation on Restricted Payments," restrictions on the payment of
dividends or the making of distributions to the Issuer by GCI Holdings, Inc.
referred to in clause (1)(iii) of the second sentence under "--Certain
Covenants--Limitation on Restrictions on Distributions From Restricted
Subsidiaries" shall be disregarded.

Notwithstanding the provisions of clause (iii) in the first paragraph of
this definition, in the event that Consolidated Net Income is being calculated
with respect to the Issuer for purposes of determining whether the Incurrence of
Indebtedness proposed to be Incurred is permissible under clause (a) of the
first paragraph of "--Certain Covenants--Limitation on Indebtedness," then (i)
if such proposed Indebtedness is proposed to be Incurred by GCI Holdings, Inc.
or any Subsidiary thereof that is a Restricted Subsidiary, restrictions on the
payment of dividends or the making of distributions to the Issuer by GCI
Holdings, Inc. referred to in clause (1)(iii) of the second sentence under
"--Certain Covenants-- Limitation on Restrictions on Distributions From
Restricted Subsidiaries" shall be disregarded and (ii) if such proposed
Indebtedness is proposed to be Incurred by the Issuer or any Subsidiary of the
Issuer (other than GCI Holdings, Inc. and its Subsidiaries) that is a Restricted
Subsidiary, restrictions on the payment of dividends or the making of
distributions to the Issuer by GCI Holdings, Inc. referred to in clause (1)(iii)
of the second sentence under "--Certain Covenants--Limitation on Restrictions on
Distributions From Restricted Subsidiaries" shall be disregarded, PROVIDED that
the lenders pursuant to the Credit Facility modify the Credit Facility to (A)
allow for the payment of dividends or the making of distributions to the Issuer
in amounts sufficient to pay the scheduled principal and interest payments on
such proposed Indebtedness when due and payable or, in the case of a proposed
Incurrence of Indebtedness by a Subsidiary, in an amount sufficient to fund
capital contributions or other Investments to or in such Subsidiary in amounts
sufficient to pay the scheduled principal and interest payments on such proposed
Indebtedness when due and payable so long as there does not exist an event which
after notice or passage of time or both would permit the lenders under the
Credit Facility to declare all amounts thereunder due and payable, and (B)
provide that in no event shall any encumbrance or restriction pursuant to the
Credit Facility prohibit distributions to pay principal, premium, if any, and
interest on such proposed Indebtedness for more than 180 days in any consecutive
360 day period, unless the maturity of the Credit Facility has been accelerated.

"CREDIT FACILITY" means the $ million credit facility pursuant to a credit
agreement, dated as of , 1997, among GCI Holdings, Inc., as
borrower, and , as lenders, as amended or supplemented, including
any agreement extending the maturity of, refinancing, replacing or

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otherwise restructuring all or any portion of the Indebtedness under such
agreement or any successor replacement agreement and whether by the same or any
other agent, lender or group of lenders.

"CUMULATIVE EBITDA" means at any date of determination the cumulative EBITDA
of the Issuer from and after the last day of the fiscal quarter of the Issuer
immediately preceding the Issue Date to the end of the fiscal quarter
immediately preceding the date of determination or, if such cumulative EBITDA
for such period is negative, the amount (expressed as a negative number) by
which such cumulative EBITDA is less than zero.

"CUMULATIVE INTEREST EXPENSE" means at any date of determination the
aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to
be paid or accrued by the Issuer and its Restricted Subsidiaries from the last
day of the fiscal quarter of the Issuer immediately preceding the Issue Date to
the end of the fiscal quarter immediately preceding the date of determination.

"DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.

"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness at the option of
the holder thereof, or is redeemable at the option of the holder thereof, in
whole or in part, on or prior to the final maturity date of the Notes.

"EBITDA" means, for any Person, for any period, an amount equal to (A) the
sum of (i) Consolidated Net Income for such period, plus, to the extent deducted
in arriving at Consolidated Net Income for such period, (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, (iii) Consolidated
Interest Expense for such period, (iv) depreciation for such period on a
consolidated basis, (v) amortization of intangibles for such period on a
consolidated basis, and (vi) any other non-cash items reducing Consolidated Net
Income for such period, minus (B) all non-cash items increasing Consolidated Net
Income for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP consistently applied, except that with respect to the
Issuer each of the foregoing items shall be determined on a consolidated basis
with respect to the Issuer and its Restricted Subsidiaries only.

"EVENT OF DEFAULT" has the meaning set forth under "--Events of Default."

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"FAIR MARKET VALUE" means with respect to any Property, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (i) if such property or asset has a
Fair Market Value of less than or equal to $15 million, by any Officer of Parent
and the Issuer or (ii) if such property or asset has a Fair Market Value in
excess of $15 million, by a majority of the Board of Directors of Parent and the
Issuer and evidenced by a Board Resolution, dated within 30 days of the relevant
transaction.

"FIBER CONSTRUCTION AGREEMENT" means each of the Fiber Construction
Facility, the Completion Guarantee, the Keep-Well Agreement, the Capacity Lease,
the Capacity Purchase Commitment and any agreements entered into in connection
with the Fiber Facility Vendor Financing.

"FIBER CONSTRUCTION FACILITY" means the Construction and Term Loan Facility,
dated , 1997 by and among and Alaska United
Partnership pursuant to which has agreed to provide
financing, on the terms and conditions contained therein, to construct and
develop an undersea fiber optic cable connecting Anchorage, Fairbanks and

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Juneau, Alaska with the continental United States, as such facility may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof and of the Indenture.

"FIBER CONSTRUCTION FACILITY OBLIGOR" means each of Alaska United
Partnership and one or more of its Subsidiaries and their respective successors
so long as it is a party to the Fiber Construction Facility.

"FIBER FACILITY VENDOR FINANCING" means Vendor Financing of one or more
Unrestricted Subsidiaries obtained for the purpose of constructing the System in
an amount not to exceed $15 million at any one time in the aggregate, which
Vendor Financing is subordinated in right of payment to the obligations under
the Fiber Construction Facility.

"FIBER MINIMUM EBITDA" means, as of any date of determination of EBITDA of
Alaska United Partnership, an amount equal to the EBITDA necessary such that the
ratio of EBITDA of Alaska United Partnership for the four full fiscal quarters
immediately preceding such date of determination to the sum of Consolidated
Interest Expense of Alaska United Partnership and all scheduled maturities,
redemptions, repayments or other amortization of Indebtedness under the Fiber
Construction Facility or the Fiber Facility Vendor Financing, in each case for
such period is not less than to 1.0; provided, however, that Fiber Minimum
EBITDA for any period shall include any amount contributed or otherwise advanced
to GCI Transport Company pursuant to the Keep-Well Agreement or to Alaska United
Partnership during such period pursuant to the GCI Transport Keep-Well
Agreement.

"GAAP" means United States generally accepted accounting principles as in
effect on the Issue Date, unless stated otherwise.

"GALAXY X AGREEMENT" means each of the Galaxy X Transponder Service
Agreement between Hughes Communications Satellite Services, Inc. and GCI
Communication Corp. and the Galaxy X Transponder Purchase Agreement, each of
which is dated August 24, 1995, as such agreements may be amended, supplemented
or otherwise modified from time to time in accordance with the terms thereof and
the terms of the Indenture.

"GCI" means General Communication, Inc., an Alaska corporation, and its
successors.

"GCI TRANSPORT KEEP-WELL AGREEMENT" means the Operating Keep-Well Commitment
dated , 1997 between GCI Transport Company and Alaska United
Partnership pursuant to which GCI Transport Company agrees to advance funds,
directly or indirectly, (including all funds advanced to GCI Transport Company
pursuant to the Keep-Well Agreement), to Alaska United Partnership in order to
maintain the Fiber Minimum EBITDA, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and the terms of the Indenture.

"GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.

"HEDGING OBLIGATION" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, foreign exchange contract, currency
swap agreement, currency option or any other similar agreement or arrangement.

"INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by merger, conversion, exchange or otherwise),
extend, assume, Guarantee or become

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liable in respect of such Indebtedness or other obligation or the recording, as
required pursuant to GAAP or otherwise, of any such Indebtedness or obligation
on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable"
and "Incurring" shall have meanings correlative to the foregoing); PROVIDED,
HOWEVER, that a change in GAAP that results in an obligation of such Person that
exists at such time, and is not theretofore classified as Indebtedness, becoming
Indebtedness shall not be deemed an Incurrence of such Indebtedness; PROVIDED
FURTHER, that solely for purposes of determining compliance with "Certain
Covenants--Limitation on Indebtedness," amortization of debt discount shall not
be deemed to be the Incurrence of Indebtedness, provided that in the case of
Indebtedness sold at a discount, the amount of such Indebtedness Incurred shall
at all times be the aggregate principal amount at Stated Maturity.

"INDEBTEDNESS" means (without duplication), with respect to any Person, any
indebtedness, secured or unsecured, contingent or otherwise, which is for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), or evidenced by bonds,
notes, debentures or similar instruments or representing the balance deferred
and unpaid of the purchase price of any property (excluding any balances that
constitute customer advance payments and deposits, accounts payable or trade
payables, and other accrued liabilities arising in the ordinary course of
business) if and to the extent any of the foregoing indebtedness would appear as
a liability upon a balance sheet of such Person prepared in accordance with
GAAP, and shall also include, to the extent not otherwise included (i) any
Capital Lease Obligations, (ii) Indebtedness of other Persons secured by a Lien
to which the Property owned or held by such first Person is subject, whether or
not the obligation or obligations secured thereby shall have been assumed (the
amount of such Indebtedness being deemed to be the lesser of the value of such
property or assets or the amount of the Indebtedness so secured), (iii)
Guarantees of Indebtedness of other Persons, (iv) any Disqualified Stock, (v)
any Attributable Indebtedness, (vi) all reimbursement obligations of such Person
in respect of letters of credit, bankers' acceptances or other similar
instruments or credit transactions issued for the account of such Person, (vii)
in the case of the Issuer, Preferred Stock of its Restricted Subsidiaries, and
(viii) to the extent not otherwise included in clauses (i) through (vii) of this
paragraph, any payment obligations of any such Person at the time of
determination under any Hedging Obligation. For purposes of this definition, the
maximum fixed repurchase price of any Disqualified Stock that does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to the Indenture;
PROVIDED, HOWEVER, that if such Disqualified Stock is not then permitted to be
repurchased, the repurchase price shall be the book value of such Disqualified
Stock. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability of any contingent obligations in respect thereof
at such date. For purposes of this definition, the amount of the payment
obligation with respect to any Hedging Obligation shall be an amount equal to
(i) zero, if such obligation is an Interest Rate Agreement permitted pursuant to
clause (v) of the second paragraph of "--Certain Covenants-- Limitation on
Indebtedness" or (ii) the notional amount of such Hedging Obligation, if such
Hedging Obligation is not an Interest Rate Agreement so permitted.

"INTEREST RATE AGREEMENT" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement.

"INVESTMENT" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other Property to others or payments for Property or services for the account
or use of others, or otherwise) to, or Incurrence of a Guarantee of any
obligation of, or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Indebtedness issued by, any other
Person. In determining the amount of any Investment made by transfer of any
Property other than cash, such Property shall be valued at its Fair Market Value
at the time of such Investment.

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"ISSUE DATE" means the date on which the Notes are initially issued.

"KEEP-WELL AGREEMENT" means the Operating Keep-Well Commitment dated
, 1997 between a Restricted Subsidiary and GCI Transport Company
pursuant to which such Restricted Subsidiary agrees to advance funds, directly
or indirectly, to a Fiber Construction Facility Obligor in order to maintain the
Fiber Minimum EBITDA, as such agreement may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof and of
the Indenture.

"LEVERAGE RATIO" is defined as the ratio of (i) the outstanding Indebtedness
of a Person and its Subsidiaries (or in the case of the Issuer, the outstanding
Indebtedness of the Issuer and its Restricted Subsidiaries) divided by (ii) the
Trailing Pro Forma EBITDA of such Person (or in the case of the Issuer, the
Trailing Pro Forma EBITDA of the Issuer and its Restricted Subsidiaries).

"LIEN" means, with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority, or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such Property (including any Capital Lease
Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).

"NET AVAILABLE CASH" from an Asset Sale means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to such Properties or assets or received in any other noncash form) in each case
net of all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all federal, state, provincial, foreign and local
taxes required to be accrued as a liability under GAAP, as a consequence of such
Asset Sale, and in each case net of all payments made on any Indebtedness (a)
which is secured by any assets subject to such Asset Sale, in accordance with
the terms of any Lien upon or other security agreement of any kind with respect
to such assets, or (b) which must (1) by its terms, or in order to obtain a
necessary consent to such Asset Sale (except, in the case of this clause (b),
Indebtedness that is PARI PASSU with or subordinated to the Notes), or (2) by
applicable law be repaid out of the proceeds from such Asset Sale, and net of
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Sale.

"NET CASH PROCEEDS" with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.

"OFFICER" means the Chief Executive Officer, the President, the Chief
Financial Officer and the Chief Accounting Officer of Parent and the Issuer.

"OFFICERS' CERTIFICATE" means a certificate signed by two Officers of Parent
and the Issuer, at least one of whom shall be the principal executive officer or
principal financial officer of Parent and the Issuer, and delivered to the
Trustee.

"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Issuer or the Trustee.

"PARENT" means GCI so long as it owns, and any other Person which acquires
or owns, directly or indirectly, 80% or more of the Voting Stock of the Issuer.

"PERMITTED HOLDERS" means (i) Ronald Duncan and his estate, spouse,
ancestors, lineal descendants and the trustee of any bona fide trust of which
the foregoing are the sole beneficiaries or

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the grantors, (ii) MCI Telecommunications Corporation and its controlled
Affiliates, (iii) Prime Cable Growth Partners, L.P., Prime Venture I Holdings,
L.P., Prime Venture II, L.P., Prime Cable Limited Partnership and their
respective controlled Affiliates, (iv) the General Communication, Inc. Employee
Stock Purchase Plan, and (v) the Estate of Bob Magness so long as Donne Fisher
is one of no more than two legal representatives of such estate.

"PERMITTED INVESTMENT" means an Investment by the Issuer or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the
making of such Investment, become a Restricted Subsidiary, PROVIDED the primary
business of such Restricted Subsidiary is a Related Business; (ii) another
Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Issuer or a Restricted Subsidiary, PROVIDED such Person's primary
business is a Related Business; (iii) Temporary Cash Investments; (iv) accounts
receivable owing to the Issuer or any Restricted Subsidiary, if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; (v) payroll, travel and similar advances
to cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vi) stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to the Issuer or
any Restricted Subsidiary or in satisfaction of judgments; and (vii) loans and
advances to employees of Parent, the Issuer or a Restricted Subsidiary made in
the ordinary course of business consistent with past practice of Parent, the
Issuer or such Restricted Subsidiary, as the case may be, PROVIDED, that such
loans and advances do not exceed in the aggregate $5 million at any one time
outstanding.

"PERMITTED LIENS" means (i) Liens on the Property of the Issuer or any
Restricted Subsidiary existing on the Issue Date; (ii) Liens on the Property of
the Issuer or any Restricted Subsidiary to secure any extension, renewal,
refinancing, replacement or refunding (or successive extensions, renewals,
refinancings, replacements or refundings), in whole or in part, of any
Indebtedness secured by Liens referred to in any of clauses (i), (vi) or (ix);
PROVIDED, HOWEVER, that any such Lien will be limited to all or part of the same
Property that secured the original Lien (plus improvements on such Property) and
the aggregate principal amount of Indebtedness that is secured by such Lien will
not be increased to an amount greater than the sum of (A) the outstanding
principal amount, or, if greater, the committed amount, of the Indebtedness
secured by Liens described under clauses (i), (vi) or (ix) at the time the
original Lien became a Permitted Lien under the Indenture and (B) an amount
necessary to pay any premiums, fees and other expenses incurred by the Issuer in
connection with such refinancing, refunding, extension, renewal or replacement;
(iii) Liens for taxes, assessments or governmental charges or levies on the
Property of the Issuer or any Restricted Subsidiary if the same shall not at the
time be delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings; (iv) Liens imposed by
law, such as carriers', warehousemen's and mechanics' Liens and other similar
Liens on the Property of the Issuer or any Restricted Subsidiary arising in the
ordinary course of business and securing payment of obligations which are not
more than 60 days past due or are being contested in good faith and by
appropriate proceedings; (v) Liens on the Property of the Issuer or any
Restricted Subsidiary Incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory requirements,
performance or return-of-money bonds, surety bonds or other obligations of a
like nature and Incurred in a manner consistent with industry practice; (vi)
Liens on Property at the time the Issuer or any Restricted Subsidiary acquired
such Property, including any acquisition by means of a merger or consolidation
with or into the Issuer or any Restricted Subsidiary; provided such Lien shall
not have been Incurred in anticipation or in connection with such transaction or
series of related transactions pursuant to which such Property was acquired by
the Issuer or any Restricted Subsidiary; (vii) other Liens on the Property of
the Issuer or any Restricted Subsidiary incidental to the conduct of their
respective businesses or the ownership of their respective Properties which were
not created in connection with the Incurrence of Indebtedness or the obtaining
of advances or credit and which do not in the aggregate materially detract from
the value of their respective

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Properties or materially impair the use thereof in the operation of their
respective businesses; (viii) pledges or deposits by the Issuer or any
Restricted Subsidiary under workmen's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which the Issuer or any Restricted Subsidiary is party, or deposits to secure
public or statutory obligations of the Issuer or any Restricted Subsidiary, or
deposits for the payment of rent, in each case Incurred in the ordinary course
of business; (ix) Liens on the Property of a Person at the time such Person
becomes a Restricted Subsidiary; PROVIDED any such Lien does not extend to any
other Property of the Issuer or any Restricted Subsidiary; and PROVIDED FURTHER
that any such Lien was not Incurred in anticipation of or in connection with the
transaction or series of related transactions pursuant to which such Person
became a Restricted Subsidiary, or (x) utility easements, building restrictions
and such other encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character.

"PERMITTED REFINANCING INDEBTEDNESS" means any renewals, extensions,
substitutions, refinancings or replacements of any Indebtedness, including any
successive extensions, renewals, substitutions, refinancings or replacements so
long as (i) the aggregate amount of Indebtedness represented thereby is not
increased by such renewal, extension, substitution, refinancing or replacement
(other than to finance fees and expenses, including any premium and defeasance
costs, incurred in connection therewith), (ii) the Average Life of such
Indebtedness is equal to or greater than the Average Life of the Indebtedness
being refinanced, (iii) the Stated Maturity of such Indebtedness is no earlier
than the Stated Maturity of the Indebtedness being refinanced and (iv) the new
Indebtedness shall not be senior in right of payment to the Indebtedness that is
being extended, renewed, substituted, refinanced or replaced; PROVIDED, that
Permitted Refinancing Indebtedness shall not include (a) Indebtedness of a
Subsidiary that refinances Indebtedness of the Issuer or (b) Indebtedness of the
Issuer or a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary.

"PERSON" means any individual, corporation, company (including any limited
liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.

"PREFERRED STOCK" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.

"PRO FORMA EBITDA" means for any Person, for any period, the EBITDA of such
Person as determined on a consolidated basis in accordance with GAAP
consistently applied after giving effect to the following: (i) if, during or
after such period, such Person or any of its Subsidiaries shall have made any
disposition of any Person or business, Pro Forma EBITDA of such Person and its
Subsidiaries shall be computed so as to give pro forma effect to such
disposition and (ii) if, during or after such period, such Person or any of its
Subsidiaries completes an acquisition of any Person or business which
immediately after such acquisition is a Subsidiary of such Person or whose
assets are held directly by such Person or a Subsidiary of such Person, Pro
Forma EBITDA shall be computed so as to give pro forma effect to the acquisition
of such Person or business; PROVIDED, HOWEVER, that, with respect to the Issuer,
all of the foregoing references to "Subsidiary or "Subsidiaries" shall be deemed
to refer only to the "Restricted Subsidiaries" of the Issuer.

"PROPERTY" means, with respect to any Person, any interest of such Person in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible, including, without limitation, Capital Stock in, and other
securities of, any other Person (but excluding Capital Stock or other securities
issued by such first mentioned Person).

"QUALIFIED STOCK" means any Capital Stock that is not Disqualified Stock.

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"RELATED BUSINESS" means the business of (i) transmitting, or providing
services related to the transmission of voice, video or data through owned or
leased wireline or wireless transmission facilities, (ii) creating, developing,
constructing, installing, repairing, maintaining or marketing communications-
related systems, network equipment and facilities, software and other products
or (iii) pursuing any other business that is primarily related to those
identified in the foregoing clauses (i) or (ii).

"RESTRICTED PAYMENT" means (i) any dividend or distribution (whether made in
cash, Property or securities) declared or paid on or with respect to any shares
of Capital Stock of the Issuer or Capital Stock of any Restricted Subsidiary
except for any dividend or distribution which is made solely to the Issuer or a
Restricted Subsidiary (and, if such Restricted Subsidiary is not wholly owned,
to the other shareholders of such Restricted Subsidiary on a pro rata basis) or
dividends or distributions payable solely in shares of Capital Stock (other than
Disqualified Stock) of the Issuer; (ii) a payment made by the Issuer or any
Restricted Subsidiary to purchase, redeem, acquire or retire any Capital Stock
of the Issuer or Capital Stock of any Affiliate of the Issuer (other than a
Restricted Subsidiary) or any warrants, rights or options to directly or
indirectly purchase or acquire any such Capital Stock or any securities
exchangeable for or convertible into any such Capital Stock; (iii) a payment
made by the Issuer or any Restricted Subsidiary to redeem, repurchase, defease
or otherwise acquire or retire for value, prior to any scheduled maturity,
scheduled sinking fund or mandatory redemption payment (other than the purchase,
repurchase, or other acquisition of any Indebtedness subordinate in right of
payment to the Notes purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition), Indebtedness of the Issuer which is
subordinate (whether pursuant to its terms or by operation of law) in right of
payment to the Notes; or (iv) an Investment (other than Permitted Investments)
in any Person; provided, however, that the term "Restricted Payment" shall not
include any payment or other transaction on or promptly following the Issue Date
and described above under "Use of Proceeds."

"RESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Issuer on or after
the Issue Date unless such Subsidiary shall have been designated an Unrestricted
Subsidiary as permitted or required pursuant to the definition of "Unrestricted
Subsidiary" and (ii) an Unrestricted Subsidiary which is redesignated as a
Restricted Subsidiary as permitted pursuant to the definition of "Unrestricted
Subsidiary."

"SALE AND LEASEBACK TRANSACTION" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or transferred
by such Person or a Subsidiary of such Person (or, in the case of the Issuer,
its Restricted Subsidiaries) and is thereafter leased back from the purchaser or
transferee thereof by such Person or one of its Subsidiaries (or, in the case of
the Issuer, its Restricted Subsidiaries).

"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act as in effect on the Issue Date;
provided, however, that for purposes of this definition only, (i) subclause (3)
of such Rule 1.02(w) shall be disregarded and (ii) "Significant Subsidiary"
shall include any Subsidiary (and its Subsidiaries) whose EBITDA comprises more
than 10% of the EBITDA of the Issuer for the most recently completed fiscal
year.

"STATED MATURITY" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).

"SUBSIDIARY" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which at
least a majority of the total voting power of the Voting Stock is held by such
first-named Person or any of its Subsidiaries and such first-named Person or any
of its Subsidiaries has the

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power to direct the management, policies and affairs thereof; or (ii) in the
case of a partnership, joint venture, association, or other business entity,
with respect to which such first-named Person or any of its Subsidiaries has the
power to direct or cause the direction of the management and policies of such
entity by contract or otherwise if in accordance with generally accepted
accounting principles such entity is consolidated with the first-named Person
for financial statement purposes.

"SYSTEM" has the meaning set forth in the Fiber Construction Facility as in
effect on the Issue Date.

"TEMPORARY CASH INVESTMENTS" means any of the following: (i) Investments in
U.S. Government Obligations maturing within 90 days of the date of acquisition
thereof, (ii) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 90 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America or any state thereof having capital, surplus and
undivided profits aggregating in excess of $500,000,000 and whose long-term debt
is rated "A-3" or "A-" or higher according to Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group (or such similar equivalent rating by at least
one "nationally recognized statistical rating organization" (as defined in Rule
436 under the Securities Act)) or National Bank of Alaska or First National Bank
of Anchorage, (iii) repurchase obligations with a term of not more than 7 days
for underlying securities of the types described in clause (i) entered into with
a bank meeting the qualifications described in clause (ii) above, and (iv)
Investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Issuer)
organized and in existence under the laws of the United States of America with a
rating at the time as of which any Investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard & Poor's Ratings Group (or such similar equivalent rating
by at least one "nationally recognized statistical rating organization" (as
defined in Rule 436 under the Securities Act)).

"TRAILING PRO FORMA EBITDA" means, with respect to any Person, such Person's
Pro Forma EBITDA for the four most recent full fiscal quarters for which
financial statements are available.

"UNRESTRICTED SUBSIDIARY" means (a) GCI Transport Company, GCI Satellite
Company, GCI Fiber Company, Fiber Hold Company, and Alaska United Partnership
and (b) any Subsidiary of an Unrestricted Subsidiary. The Parent's and the
Issuer's Board of Directors may designate any Person that becomes a Subsidiary
of the Issuer or any Restricted Subsidiary to be an Unrestricted Subsidiary if
(i) the Subsidiary to be so designated does not own any Capital Stock or
Indebtedness of, or own or hold any Lien on any Property of, the Issuer or any
other Restricted Subsidiary, (ii) the Subsidiary to be so designated is not
obligated under any Indebtedness or other obligation that, if in default, would
result (with the passage of time or notice or otherwise) in a default on any
Indebtedness of the Issuer or any Restricted Subsidiary and (iii) either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) such
designation is effective immediately upon such entity becoming a Subsidiary of
the Issuer or any Restricted Subsidiary. Unless so designated as an Unrestricted
Subsidiary, any Person that becomes a Subsidiary of the Issuer or of any
Restricted Subsidiary will be classified as a Restricted Subsidiary; PROVIDED,
HOWEVER, that such Subsidiary shall not be designated a Restricted Subsidiary
and shall be automatically classified as an Unrestricted Subsidiary if the
Issuer would be unable to Incur at least $1.00 of additional Indebtedness
pursuant to clause (a) of the first paragraph of "--Certain
Covenants--Limitation on Indebtedness." Except as provided in the second
sentence of this paragraph, no Restricted Subsidiary may be redesignated as an
Unrestricted Subsidiary. Parent's and the Issuer's Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary if,
immediately after giving pro forma effect to such designation, (x) the Issuer
could Incur at least $1.00 of additional indebtedness pursuant to clause (a) of
the first paragraph of "--Certain Covenants--Limitation on Indebtedness" and (y)
no Default or Event of Default shall have occurred and be continuing or would
result therefrom. Any such designation by Parent's and the Issuer's Board of
Directors will be evidenced to the Trustee by filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying (i) that such designation complies with the foregoing

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provisions and (ii) giving the effective date of such designation, such filing
with the Trustee to occur within 75 days after the end of the fiscal quarter of
the Issuer in which such designation is made (or in the case of a designation
made during the last fiscal quarter of the Issuer's fiscal year, within 120 days
after the end of such fiscal year).

"UNUSED CAPACITY" means, as of the end of any fiscal quarter commencing with
the first full fiscal quarter following the fifth anniversary of the Issue Date,
that amount of capacity available for such quarter in the System which remains
unsold (excluding, for purposes of determining such amount, any capacity
delivered pursuant to the Capacity Lease) and which (i) if sold to a Restricted
Subsidiary at the rate specified in the Capacity Purchase Commitment, would have
required such Restricted Subsidiary to (a) purchase capacity in excess of its
requirements for such quarter or (b) pay an amount for such capacity in excess
of the lowest price paid by such Restricted Subsidiary for equivalent capacity
to a third party in the open market during such quarter and (ii) if sold to such
Restricted Subsidiary at the rate specified in the Capacity Purchase Commitment,
would have resulted in Alaska United Partnership having on a pro forma basis,
after giving effect to such purchase, the Fiber Minimum EBITDA for such full
fiscal quarter.

"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.

"VENDOR FINANCING" means the financing entered into with any vendor or
supplier (or any financial institution acting on behalf of or for the purpose of
directly financing purchases from such vendor or supplier) to the extent the
Indebtedness thereunder is incurred for the purpose of financing the cost
(including the cost of design, development, site acquisition, construction,
integration, manufacture or acquisition) or maintenance of personal property
(tangible or intangible) used, or to be used, in a Related Business.

"VOTING STOCK" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.

NOTICES

Notices to holders of Notes will be sent by mail to the addresses of such
holders as they may appear in the Security Register.

GOVERNING LAW

The Indenture and the Notes are governed by and construed in accordance with
the internal laws of the State of New York without reference to principles of
conflict of laws.

THE TRUSTEE

The Bank of New York is the Trustee under the Indenture. The Bank of New
York is a lender pursuant to the Credit Facility.

The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such of the rights and powers vested in it under the Indenture and use
the same degree of care and skill in its exercise as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.

125
<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Issuer has agreed to issue and sell to the
Underwriters listed below and each of the Underwriters has agreed to purchase,
the principal amount of Notes set forth opposite its name below.

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Salomon Brothers Inc............................................................................ $
Schroder Wertheim & Co. Incorporated............................................................
NationsBanc Capital Markets, Inc................................................................
TD Securities (USA) Inc.........................................................................
----------------
$ 150,000,000
----------------
----------------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions set forth therein. The Underwriters will be
obligated to purchase all the Notes offered hereby if any Notes are purchased.

The Underwriters have advised the Issuer that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of % of such principal amount to certain other dealers. After the initial
public offering, the public offering price and such concessions may be changed.

The Underwriting Agreement provides that the Issuer will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.

The Issuer has been advised by the Underwriters that they presently intend
to make a market in the Notes, as permitted by applicable laws and regulations,
although they are under no obligation to do so. There is no existing market for
the Notes and there can be no assurance that a market will develop. See "Risk
Factors--Lack of Public Market for Notes."

Under the Conduct Rules of the National Association of Securities Dealers,
Inc. (the "NASD"), when more than 10% of the proceeds of a public offering of
debt securities, not including underwriting compensation, are to be paid to
members of the NASD participating in such public offering of debt securities or
affiliates of such members, the yield at which the debt securities are
distributed to the public must be no lower than that recommended by a qualified
independent underwriter meeting certain standards. Toronto Dominion Securities
(USA) Inc. and NationsBanc Capital Markets, Inc. are members of the NASD. TD
Securities (USA) Inc. is an affiliate of Toronto Dominion (Texas), Inc., the
Administrative Agent, a Managing Agent and a Lender under the Cable Credit
Facility and a Lender under the Telephony Credit Facility. NationsBanc Capital
Markets, Inc. is an affiliate of NationsBank of Texas, N.A., a Managing Agent,
the Syndication Agent and a Lender under the Cable Credit Facility and the
Administrative Agent and a Lender under the Telephony Credit Facility. Toronto
Dominion (Texas), Inc. and NationsBank of Texas, N.A. will receive from the
proceeds of the Offering a total of approximately $ million and $
million, respectively, for the repayment of borrowings under the credit
facilities and approximately $ and $ , respectively, in fees
related to the proposed amendments to such facilities. Toronto Dominion (Texas),
Inc. and NationsBank of Texas, N.A., will receive more than 10% of the net
proceeds from this Offering as a result of the use of such proceeds to repay a
portion of the borrowings under the credit facilities. See "Use of Proceeds." As
a result, this Offering is being made in compliance with paragraph (8) of Rule
2710(c) the Conduct Rules of the NASD

126
<PAGE>
which relates to offerings with respect to which net proceeds are directed to
members of the NASD. Salomon Brothers Inc will act as a qualified independent
underwriter in connection with the Offering and assume the customary
responsibilities of acting as a qualified independent underwriter in pricing and
conducting due diligence for this Offering. The Company has also agreed to
indemnify Salomon Brothers Inc against certain liabilities, including
liabilities under the Securities Act, and to afford Salomon Brothers Inc certain
rights of contribution.

In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain, or otherwise affect the market price of the Notes. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M under the Securities Exchange Act of 1934, as amended,
pursuant to which such persons may bid for or purchase Notes for the purposes of
stabilizing their market price. The Underwriters also may create a short
position for their respective accounts by selling more Notes in connection with
this Offering than they are committed to purchase from the Issuer, and in such
case may purchase Notes in the open market following completion of this Offering
to cover all or a portion of such short position. In addition, Salomon Brothers
Inc, on behalf of the Underwriters, may impose "penalty bids" under contractual
arrangements between the Underwriters whereby it may reclaim from an Underwriter
(or dealer participating in this Offering) for the account of the Underwriters,
the selling concession with respect to Notes that are distributed in this
Offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Notes at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph are required, and, if they are undertaken, they may be discontinued at
any time.

LEGAL MATTERS

The validity of the Notes and certain other legal matters in connection with
the Notes offered hereby are being passed upon for the Company by Wohlforth,
Argetsinger, Johnson & Brecht, a Professional Corporation, Anchorage, Alaska,
and by Sherman & Howard L.L.C., Denver, Colorado, special counsels for the
Company. Paul, Hastings, Janofsky & Walker LLP, New York, New York has acted as
legal counsel to the Underwriters in connection with the Offerings.

EXPERTS

The consolidated financial statements and schedule of the Company as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, have been included in this Prospectus and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein which, as
to the year ended December 31, 1996, are based in part on the report of Ernst &
Young LLP, independent auditors (whose report covers the consolidated financial
statements of GCI Cable, Inc. (a subsidiary of the Company) and its
subsidiaries, as of December 31, 1996 and for the period from inception (April
12, 1996) to December 31, 1996, which are not included separately herein), given
upon the authority of said firms as experts in accounting and auditing.

The financial statements of Prime Cable of Alaska, L.P. as of December 31,
1995 and 1994 and for each of the two years in the period ended December 31,
1995, and the combined financial statements of the Alaskan Cable Network as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, appearing in this Prospectus and in the Registration
Statement, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.

127
<PAGE>
The audited financial statements of Alaska Cablevision at December 31, 1995
and 1994, and for each of the three years in the period ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Carl & Carlsen, independent auditors, as set forth in their report appearing
elsewhere herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act") and in accordance therewith is
required to file reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and at the following Regional Offices of the
Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information filed electronically by the
Company, and can be found at http:\\www.sec.gov.

The Class A Common Stock is designated a national market system stock on the
Nasdaq Stock Market. The Class B Common Stock is traded in the over-the-counter
market. Reports, proxy statements and other information concerning the Company
can be inspected at the offices of the Nasdaq Stock Market located at 1735 K
Street, N.W., Washington, D.C. 20006.

The Issuer has filed a Registration Statement with the Commission with
respect to the Notes offered hereby. This Prospectus, which constitutes a part
of the Registration Statement, does not include all of the information set forth
in the Registration Statement and the exhibits and schedules thereto, as
permitted by the rules and regulations of the Commission. For further
information with respect to the Issuer and the Notes, reference is made to the
Registration Statement and the exhibits and schedules filed as a part thereof.
The Registration Statement, including any amendments, schedules and exhibits
filed or incorporated by reference as a part of it, is available for inspection
and copying as set forth above. Statements contained in this Prospectus about
the contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in its entirety by such reference.

GLOSSARY

APUC -- The Alaska Public Utilities Commission.

ATU -- The Anchorage Telephone Utility, a public utility and local telephone
exchange owned by the Municipality of Anchorage and the largest
municipally-owned LEC in the country.

AVERAGE MONTHLY REVENUE PER EQUIVALENT BASIC SUBSCRIBER -- Total subscriber
revenues for the year from the sale of cable television services divided by
average total equivalent basic subscribers divided by 12.

BASIC PENETRATION -- Equivalent basic subscribers divided by homes passed.

BST -- Basic tier of cable services.

CAP (COMPETITIVE ACCESS PROVIDER) -- A company that provides its customers
with an alternative to the local exchange company for local transport of private
line and special access telecommunications services.

128
<PAGE>
CENTRAL OFFICES -- The switching centers or central switching facilities of
the local exchange companies.

COLOCATION -- The ability of a CAP such as the Company to connect its
network to the LEC's central offices. Physical colocation occurs when a CAP
places its network connection equipment inside the local exchange company's
central offices. Virtual colocation is an alternative to physical colocation
pursuant to which the LEC permits a CAP to connect its network to the LEC's
central offices on comparable terms, even though the CAP's network connection
equipment is not physically located inside the central offices.

CPST -- Cable programming service tier.

DAMA -- Demand assigned multiple access.

DBS -- Direct broadcast satellite television.

DEDICATED -- Telecommunications lines reserved for use by particular
customers.

DIALING PARITY -- The ability of a competing local or toll service provider
to provide telecommunications services in such a manner that customers have the
ability to route automatically, without the use of any access code, their
telecommunications to the service provider of the customer's designation and the
ability of customers to dial the same number of digits on a competitor's network
as on the LEC's network.

DIGITAL -- A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission and switching technologies employ a
sequence of these pulses to represent information as opposed to the continuously
viable analog signal. The precise digital numbers minimize distortion in the
case of audio transmission.

DS3 -- Digital signal level 3, a 44.736 megabits per second digital
transmission facility.

EBITDA -- Consists of earnings before interest (net), income taxes,
depreciation, amortization, and other income (expense). EBITDA is a measure
commonly used in the telecommunications and cable television industries to
analyze companies on the basis of operating performance. It is not a measure of
financial performance under GAAP and should not be considered as an alternative
to net income as a measure of performance nor as an alternative to cash flow as
a measure of liquidity.

EQUIVALENT BASIC SUBSCRIBERS -- A number representing the sum of (a)
residential customers receiving at least the entry level of cable television
service offered by a system ("Basic Service") at the system's standard
residential rate for Basic Service plus (b) for customers receiving Basic
Service under bulk billing arrangements at a rate less than the system's
standard residential rate for Basic Service (including multi-unit residential
complexes, hotels, motels and hospitals), the number derived by dividing the
monthly amount billed to all such subscribers for Basic Service by the monthly
standard residential rate for Basic Service.

GTEOC -- GTE Operating Companies.

HOMES PASSED -- Dwellings and commercial establishments that are or can be
connected to the distribution system of a cable system without further extension
of the transmission lines of that cable system.

HSD -- Home satellite dish earth stations.

INTERCONNECTION -- Interconnection of facilities between or among local
exchange carriers, including potential physical colocation of one carrier's
equipment in the other carrier's premises to facilitate such interconnection.

129
<PAGE>
INTERLATA -- Telecommunications services originating in a LATA and
terminating outside of that LATA.

INTRALATA -- Telecommunications services originating and terminating within
the same LATA.

ISDN -- Integrated services digital network.

LATA (LOCAL ACCESS AND TRANSPORT AREA) -- A geographic area composed of
contiguous local exchanges, usually but not always within a single state.

LFA -- Local franchising authority.

LOCAL EXCHANGE -- A geographic area determined by the appropriate state
regulatory authority in which calls generally are transmitted without toll
charges to the calling or called party.

LEC (LOCAL EXCHANGE CARRIER) -- A company providing local telephone
services.

LONG DISTANCE CARRIERS (INTEREXCHANGE CARRIERS) -- Long distance carriers
provide services between local exchanges on an interstate or intrastate basis. A
long distance carrier may offer services over its own or another carrier's
facilities.

MAN -- Metropolitan area network.

MMDS -- Multichannel, multipoint distribution service.

MTS -- Message toll service.

NPT -- New product tier.

OVS -- Open video system.

PACS -- Personal access communications system.

PCS (PERSONAL COMMUNICATION SERVICE) -- A telephone service with respect to
which a telephone number or numbers are assigned to a person rather than to a
fixed location thereby allowing that person to receive and make calls from any
location within the area serviced by the personal communication service.

PEG -- Public access, educational and government.

POP -- The estimates of the 1995 population of a Metropolitan Statistics
Area for which the FCC licensed communications systems or a Rural Service Area
for which the FCC licensed communications systems, as derived from the 1995
population estimates prepared by Strategic Mapping, Inc.

PREMIUM PENETRATION -- Premium service units divided by equivalent basic
subscribers.

PREMIUM SERVICE UNITS -- Premium programming services selected by and sold
to subscribers on an la carte or packaged basis for monthly fees in addition to
the fee for Basic Service.

SMATV -- Satellite master antenna television.

SS7 -- Signaling system number 7.

SSP -- Service switching point, an SS7 network element.

SWITCH -- A device that opens or closes circuits or selects the paths or
circuits to be used for transmission of information. Switching is a process of
interconnecting circuits to form a transmission path between users.

SWITCHED ACCESS TRANSPORT SERVICES -- Transportation of switched traffic
along dedicated lines between the local exchange company central offices and
long distance carrier pop.

130
<PAGE>
SWITCHED TRAFFIC -- Telecommunications traffic along the public switched
network. This traffic is generally switched at the LEC's central offices.

TRS -- Telephone relay services.

UNBUNDLED ACCESS -- Access to unbundled elements of a telecommunications
services provider's network, including network facilities, equipment, features,
functions and capabilities, at any technically feasible point within such
network.

VSAT -- Very small aperture terminal.

131
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
COMPANY
Independent Auditors' Report--KPMG Peat Marwick LLP...................................................... F-3
Report of Independent Auditors--Ernst & Young LLP........................................................ F-4
Consolidated Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997 (unaudited).............. F-5
Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and the
three-month periods ended March 31, 1996 and 1997 (unaudited).......................................... F-7
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and 1996 and
the three-month periods ended March 31, 1996 and 1997 (unaudited)...................................... F-8
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and for the
three-month periods ended March 31, 1996 and 1997 (unaudited).......................................... F-9
Notes to Consolidated Financial Statements............................................................... F-10

PRIME CABLE

Report of Independent Auditors--Ernst & Young LLP........................................................ F-34

Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)............................ F-35

Statements of Operations for the years ended December 31, 1994 and 1995 and for the six-month periods
ended June 30, 1995 and 1996 (unaudited)............................................................... F-36

Statements of Changes in Partners' Capital Deficiency for the years ended December 31, 1994 and 1995..... F-37

Statements of Cash Flows for the years ended December 31, 1994 and 1995 and for the six-month periods
ended June 30, 1995 and 1996 (unaudited)............................................................... F-38

Notes to Financial Statements............................................................................ F-39

MD&A Discussion regarding Prime Cable.................................................................... F-47

ALASKAN CABLE NETWORK (Combined for Alaskan Cable/Fairbanks, Alaskan Cable/Juneau, and Alaskan
Cable/Ketchikan)

Report of Independent Auditors--Ernst & Young LLP........................................................ F-50

Combined Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)................... F-51

Combined Statements of Income for the years ended December 31, 1993, 1994 and 1995 and for the six-month
periods ended June 30, 1995 and 1996 (unaudited)....................................................... F-52

Combined Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995......... F-53

Combined Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and for the
six-month periods ended June 30, 1995 and 1996 (unaudited)............................................. F-54

Notes to Combined Financial Statements................................................................... F-55

MD&A Discussion regarding Alaskan Cable Network.......................................................... F-63
</TABLE>

F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
ALASKA CABLEVISION

Report of Independent Auditors--Carl & Carlsen........................................................... F-66

Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)............................ F-67

Statements of Income for the years ended December 31, 1993, 1994 and 1995 and for the six-month periods
ended June 30, 1995 and 1996 (unaudited)............................................................... F-68

Statements of Stockholders' Equity for the years ended December 31, 1993, 1994 and 1995.................. F-69

Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and for the six-month
periods ended June 30, 1995 and 1996 (unaudited)....................................................... F-70

Notes to Financial Statements............................................................................ F-71

MD&A Discussion regarding Alaska Cablevision............................................................. F-74

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS OF THE COMPANY........................................ F-78
</TABLE>

F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
General Communication, Inc.:

We have audited the accompanying consolidated balance sheets of General
Communication, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of GCI Cable, Inc., a wholly owned subsidiary, which 1996 statements
reflect total assets of $310 million and total revenues of $9.5 million of the
related consolidated totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for GCI Cable, Inc., is based solely on the report of the
other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of General Communication, Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.

/s/ KPMG PEAT MARWICK LLP

Anchorage, Alaska
February 21, 1997

F-3
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
GCI Cable, Inc. and Subsidiaries

We have audited the consolidated balance sheet of GCI Cable, Inc. and
Subsidiaries as of December 31, 1996 and the related consolidated statements of
operations, shareholder's equity and cash flows for the period from inception
(April 12, 1996) to December 31, 1996 (not presented separately herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GCI Cable, Inc.
and Subsidiaries at December 31, 1996, and the consolidated results of their
operations and their cash flows for the period from inception (April 12, 1996)
to December 31, 1996 in conformity with generally accepted accounting
principles.

/s/ ERNST & YOUNG LLP

Austin, Texas
February 14, 1997

F-4
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
ASSETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996 1995
----------- ----------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................................. $ 4,730 13,349 4,017
----------- ----------- ---------
Receivables:
Trade............................................................... 27,815 27,953 21,737
Other............................................................... 1,803 1,412 253
----------- ----------- ---------
29,618 29,365 21,990
Less allowance for doubtful receivables............................... 776 597 295
----------- ----------- ---------
Net receivables..................................................... 28,842 28,768 21,695
----------- ----------- ---------
Prepaid and other current assets...................................... 2,288 2,236 1,566
Deferred income taxes, net (note 7)................................... 871 835 746
Inventories........................................................... 1,666 1,589 991
Notes receivable (note 4)............................................. 330 325 167
----------- ----------- ---------
Total current assets................................................ 38,727 47,102 29,182
----------- ----------- ---------
Property and equipment, at cost (notes 6, 9, 10 and 11)
Land and buildings.................................................... 692 692 73
Telephony distribution systems........................................ 90,256 81,414 67,434
Cable television distribution systems................................. 53,250 52,284 0
Transportation equipment.............................................. 1,072 1,064 0
Support equipment..................................................... 20,559 19,994 11,610
Property and equipment under capital leases........................... 2,030 2,030 2,030
----------- ----------- ---------
167,859 157,478 81,147
Less amortization and accumulated depreciation........................ 45,770 41,497 33,789
----------- ----------- ---------
Net property and equipment in service............................... 122,089 115,981 47,358
Construction in progress.............................................. 19,901 20,770 3,096
----------- ----------- ---------
Net property and equipment.......................................... 141,990 136,751 50,454
Notes receivable (note 4)............................................... 1,344 1,016 904
Intangible assets, net of amortization (notes 2 and 5).................. 249,243 250,920 3,125
Transponder deposit (note 13)........................................... 9,100 9,100 0
Deferred loan costs, net of amortization................................ 759 900 110
Other assets, at cost, net of amortization.............................. 1,715 1,546 990
----------- ----------- ---------
Total assets........................................................ $ 442,878 447,335 84,765
----------- ----------- ---------
----------- ----------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996 1995
----------- ----------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Current liabilities:
Current maturities of long-term debt (note 6)......................... $ 31,938 31,969 1,689
Current maturities of obligations under capital leases (note 11)...... 74 71 282
Accounts payable...................................................... 22,320 23,677 16,861
Accrued payroll and payroll related obligations....................... 3,679 3,830 2,108
Accrued liabilities................................................... 4,269 4,173 1,134
Accrued income taxes (note 7)......................................... 0 0 547
Accrued interest...................................................... 351 2,708 132
Subscriber deposits and deferred revenues............................. 3,444 3,449 1,317
----------- ----------- ---------
Total current liabilities........................................... 66,075 69,877 24,070
Long-term debt, excluding current maturities (note 6)................. 180,873 191,273 8,291
Obligations under capital leases, excluding current maturities (note
11)................................................................. 0 0 26
Obligations under capital leases due to related parties, excluding
current maturities (notes 10 and 11)................................ 655 675 739
Deferred income taxes, net (note 7)................................... 34,020 33,720 7,004
Other liabilities..................................................... 2,160 2,236 1,619
----------- ----------- ---------
Total liabilities................................................... 283,783 297,781 41,749
----------- ----------- ---------
Stockholders' equity (notes 2, 3, 6, 7 and 8):
Common stock (no par):
Class A. Authorized 50,000,000 shares; issued and outstanding
36,586,973 and 19,680,199 shares at December 31, 1996 and 1995,
respectively........................................................ 123,498 113,421 13,912
Class B. Authorized 10,000,000 shares; issued and outstanding
4,074,028 and 4,175,434 shares at December 31, 1996 and 1995,
respectively; convertible on a share-per-share basis into Class A
common stock........................................................ 3,432 3,432 3,432
Less cost of 199,081 and 122,611 Class A common shares held in
treasury at December 31, 1996 and 1995, respectively................ (1,039) (1,010) (389)
Paid-in capital......................................................... 4,247 4,229 4,041
Retained earnings....................................................... 28,957 29,482 22,020
----------- ----------- ---------
Total stockholders' equity.......................................... 159,095 149,554 43,016
----------- ----------- ---------
Commitments and contingencies (notes 11 and 13).........................
Total liabilities and stockholders' equity........................ $ 442,878 447,335 84,765
----------- ----------- ---------
----------- ----------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED YEARS ENDED
-------------------- -------------------------------------
MARCH 31, DECEMBER 31,
1997 1996 1996 1995 1994
--------- --------- ----------- ----------- -----------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues (notes 9 and 10):
Telecommunication services....................... $ 39,225 37,969 155,419 129,279 116,981
Cable services................................... 13,656 -- 9,475 0 0
--------- --------- ----------- ----------- -----------
Total revenues................................. 52,881 37,969 164,894 129,279 116,981
Cost of sales and services......................... 27,168 21,302 92,664 72,091 63,877
Selling, general and administrative expenses....... 16,301 10,833 46,412 37,691 33,468
Depreciation and amortization...................... 6,120 1,887 9,409 5,993 6,639
--------- --------- ----------- ----------- -----------
Operating income (note 9)...................... 3,292 3,947 16,409 13,504 12,997
Interest expense, net (notes 3 and 6).............. 3,949 260 3,719 903 1,316
--------- --------- ----------- ----------- -----------
Net earnings before income taxes............... (657) 3,687 12,690 12,601 11,681
Income tax expense (notes 3 and 7)................. (132) 1,550 5,228 5,099 4,547
--------- --------- ----------- ----------- -----------
Net earnings................................... $ (525) 2,137 7,462 7,502 7,134
--------- --------- ----------- ----------- -----------
--------- --------- ----------- ----------- -----------
Net earnings per common share.................. $ (0.01 0.09 0.27 0.31 0.30
--------- --------- ----------- ----------- -----------
--------- --------- ----------- ----------- -----------
Weighted average number of shares of common stock
equivalents outstanding.......................... 43,167 24,854 27,668 24,426 24,083
--------- --------- ----------- ----------- -----------
--------- --------- ----------- ----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHARES OF CLASS A
COMMON STOCK CLASS A CLASS B SHARES
------------------------ COMMON COMMON HELD IN
(AMOUNTS IN THOUSANDS) CLASS A CLASS B STOCK STOCK TREASURY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993................................. 19,001 4,114 $ 13,470 3,432 (328)
Net earnings.................................................. -- -- -- -- --
Class B shares converted to Class A........................... 9 (9) -- -- --
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... -- -- -- -- --
Shares issued under stock option plan......................... 72 -- 96 -- --
Shares issued under warrant agreement, net.................... 254 -- 185 -- --
Shares issued and issuable under officer stock option
agreements.................................................. 281 74 79 -- --
----------- ----- ----------- ----- -----------
Balances at December 31, 1994................................. 19,617 4,179 13,830 3,432 (328)
Net earnings.................................................. -- -- -- -- --
Class B shares converted to Class A........................... 3 (3) -- -- --
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... -- -- -- -- --
Shares purchased and held in Treasury......................... -- -- -- -- (61)
Shares issued under stock option plan......................... 40 -- 82 -- --
Shares issued and issuable under officer stock option
agreements.................................................. 20 -- -- -- --
----------- ----- ----------- ----- -----------
Balances at December 31, 1995................................. 19,680 4,176 13,912 3,432 (389)
Net earnings.................................................. -- -- -- -- --
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... -- -- -- -- --
Shares issued under stock option plan......................... 1 -- 1 -- --
Shares issued and issuable under officer stock option
agreements.................................................. -- -- -- -- --
----------- ----- ----------- ----- -----------
Balances at March 31, 1996 (unaudited)........................ 19,681 4,176 13,913 3,432 (389)
Net earnings (unaudited)...................................... -- -- -- -- --
Class B shares converted to Class A........................... 102 (102) -- -- --
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... -- -- -- -- --
Shares issued to MCI.......................................... 2,000 -- 13,000 -- --
Shares issued pursuant to acquisitions, net of costs totaling
$432........................................................ 14,723 -- 86,278 -- --
Shares purchased and held in Treasury......................... -- -- -- -- (621)
Shares issued under stock option plan......................... 81 -- 230 -- --
----------- ----- ----------- ----- -----------
Balances at December 31, 1996................................. 36,587 4,074 113,421 3,432 (1,010)
Net Loss (unaudited).......................................... -- -- -- -- --
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... -- -- -- -- --
Class B shares converted to Class A........................... 3 (3) -- -- --
Shares issued upon conversion of convertible note............. 1,538 -- 9,983 -- --
Shares purchased and held in Treasury......................... -- -- -- -- (29)
Shares issued under stock option plan......................... 31 -- 94 -- --
----------- ----- ----------- ----- -----------
Balances at March 31, 1997 (unaudited)........................ 38,159 4,071 $ 123,498 3,432 (1,039)
----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- -----------

<CAPTION>
PAID-IN RETAINED
(AMOUNTS IN THOUSANDS) CAPITAL EARNINGS
----------- -----------
<S> <C> <C>
Balances at December 31, 1993................................. 3,252 7,384
Net earnings.................................................. -- 7,134
Class B shares converted to Class A........................... -- --
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... 371 --
Shares issued under stock option plan......................... -- --
Shares issued under warrant agreement, net.................... -- --
Shares issued and issuable under officer stock option
agreements.................................................. 18 --
----- -----------
Balances at December 31, 1994................................. 3,641 14,518
Net earnings.................................................. -- 7,502
Class B shares converted to Class A........................... -- --
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... 397 --
Shares purchased and held in Treasury......................... -- --
Shares issued under stock option plan......................... -- --
Shares issued and issuable under officer stock option
agreements.................................................. 3 --
----- -----------
Balances at December 31, 1995................................. 4,041 22,020
Net earnings.................................................. -- 2,137
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... 16 --
Shares issued under stock option plan......................... -- --
Shares issued and issuable under officer stock option
agreements.................................................. 1 --
----- -----------
Balances at March 31, 1996 (unaudited)........................ 4,058 24,157
Net earnings (unaudited)...................................... -- 5,325
Class B shares converted to Class A........................... -- --
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... 171 --
Shares issued to MCI.......................................... -- --
Shares issued pursuant to acquisitions, net of costs totaling
$432........................................................ -- --
Shares purchased and held in Treasury......................... -- --
Shares issued under stock option plan......................... -- --
----- -----------
Balances at December 31, 1996................................. 4,229 29,482
Net Loss (unaudited).......................................... -- (525)
Tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting
purposes.................................................... 18 --
Class B shares converted to Class A........................... -- --
Shares issued upon conversion of convertible note............. -- --
Shares purchased and held in Treasury......................... -- --
Shares issued under stock option plan......................... -- --
----- -----------
Balances at March 31, 1997 (unaudited)........................ 4,247 28,957
----- -----------
----- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- -----------------------------------
1997 1996 1996 1995 1994
---------- --------- ------------ --------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings.................................... $ (525) 2,137 7,462 7,502 7,134
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization................. 5,979 1,887 9,409 5,993 6,639
Amortization of deferred loan costs........... 141 0 63 230 100
Deferred income tax expense................... 264 13 2,252 1,017 1,588
Deferred compensation and
compensatory stock options.................. (18) 143 619 433 343
Disposals of property and equipment........... 0 0 30 170 0
Bad debt expense, net of write-offs........... 179 (37) (34) (114) (312)
Other noncash income and expense items........ 16 (11) (42) 354 (36)
Change in operating assets and liabilities
(note 3).................................... (4,196) (1,773) 2,612 (1,307) 3,063
---------- --------- ------------ --------- ----------
Net cash provided by operating activities......... 1,840 2,359 22,371 14,278 18,519
---------- --------- ------------ --------- ----------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired
(notes 2 and 3)............................... 0 0 (72,818) 0 0
Purchases of property and equipment............. (9,529) (6,950) (38,642) (8,938) (10,604)
Purchases of other assets including long-term
deposits...................................... 197 (45) (10,959) (510) (1,110)
Proceeds from the sale of investment security... 0 0 0 832 0
Notes receivable issued......................... (337) (130) (515) (251) (339)
Payments received on notes receivable........... 4 2 288 184 10
Restricted cash investments..................... 0 0 0 0 684
---------- --------- ------------ --------- ----------
Net cash used in investing activities............. (10,059) (7,123) (122,646) (8,683) (11,359)
---------- --------- ------------ --------- ----------
Cash flows from financing activities:
Long-term borrowings............................ 10,000 3,300 208,000 0 0
Repayments of long-term borrowings and capital
lease obligations............................. (10,448) (485) (5,039) (2,824) (8,494)
Proceeds from common stock issuance............. 77 1 13,231 82 360
Purchase of treasury stock...................... (29) 0 (621) (61) 0
Retirement of bank debt assumed................. 0 0 (105,200) 0 0
Payment of deferred loan costs.................. 0 0 (764) (424) 0
---------- --------- ------------ --------- ----------
Net cash provided (used) by financing
activities.................................... (400) 2,816 109,607 (3,227) (8,134)
---------- --------- ------------ --------- ----------
Net increase (decrease) in cash and cash
equivalents..................................... (8,619) (1,948) 9,332 2,368 (974)

Cash and cash equivalents at beginning of
period.......................................... 13,349 4,017 4,017 1,649 2,623
---------- --------- ------------ --------- ----------
Cash and cash equivalents at end of period...... $ 4,730 2,069 13,349 4,017 1,649
---------- --------- ------------ --------- ----------
---------- --------- ------------ --------- ----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-9
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

(a) ORGANIZATION

General Communication, Inc. ("GCI"), an Alaska corporation, was incorporated
in 1979. GCI Communication Corp. ("GCC"), an Alaska corporation, is a wholly
owned subsidiary of GCI and was incorporated in 1990. GCI Communication
Services, Inc. ("Communication Services"), an Alaska corporation, is a wholly
owned subsidiary of GCI and was incorporated in 1992. GCI Leasing Co., Inc.
("Leasing Company"), an Alaska corporation, is a wholly owned subsidiary of
Communication Services and was incorporated in 1992. GCI and GCC are engaged in
the transmission of interstate and intrastate private line and switched message
long distance telephone service between Anchorage, Fairbanks, Juneau, and other
communities in Alaska and the remaining United States and foreign countries. GCC
also provides northbound services to certain common carriers terminating traffic
in Alaska and sells and services dedicated communications systems and related
equipment. Communication Services provides private network point-to-point data
and voice transmission services between Alaska, Hawaii and the western
contiguous United States. Leasing Company owns and leases capacity on an
undersea fiber optic cable used in the transmission of interstate private line
and switched message long distance services between Alaska and the remaining
United States and foreign countries.

Cable television services are provided through GCI Cable, Inc. and through
its ownership in Prime Cable of Alaska L.P. ("Prime"), and through GCI Cable,
Inc.'s wholly owned subsidiaries GCI Cable/ Fairbanks, Inc., and GCI
Cable/Juneau, Inc. (collectively "GCI Cable" or "Cable Companies"). GCI Cable,
Inc. and its subsidiaries are Alaska corporations and were incorporated in 1996.
GCI Cable, Inc. is a wholly owned subsidiary of GCI. Prime is a limited
partnership organized under the laws of the state of Delaware whose partnership
interests are wholly owned by GCI Cable, Inc.

(b) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of GCI, its
wholly owned subsidiaries GCC, Communication Services, GCI Cable, and
Communication Services' wholly owned subsidiary Leasing Company (collectively
"the Company"). All significant intercompany balances and transactions have been
eliminated in consolidation.

Primary earnings per common share are determined by dividing net earnings by
the weighted number of common and common equivalent shares outstanding:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Weighted average common shares outstanding..................... 26,498 23,723 23,199
Common equivalent shares outstanding........................... 1,170 703 884
--------- --------- ---------
27,668 24,426 24,083
--------- --------- ---------
--------- --------- ---------
</TABLE>

The difference between shares for primary and fully diluted earnings per
share was not significant in any period presented.

(d) CASH AND CASH EQUIVALENTS

Cash equivalents consist of short-term, highly liquid investments which are
readily convertible into cash.

F-10
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
(e) INVENTORIES

Inventory of merchandise for resale and parts is stated at the lower of cost
or market. Cost is determined using the first-in, first-out method for parts and
the specific identification method for equipment held for resale.

Cable television inventories are carried at the lower of cost (weighted
average unit cost) or market.

(f) PROPERTY AND EQUIPMENT

TELECOMMUNICATIONS PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Construction costs of transmission
facilities are capitalized. Equipment financed under capital leases is recorded
at the lower of fair market value or the present value of future minimum lease
payments. Construction in progress represents distribution systems and support
equipment not placed in service on December 31, 1996; management intends to
place this equipment in service during 1997.

The Company's investment in jointly owned earth station assets on Adak
Island, Alaska is stated at cost and is depreciated on a straight-line basis
over lives ranging from 10 to 12 years. Revenues derived from customers whose
service transits the joint facilities are recognized based upon the level of
service and supporting facilities that are provided by each owner.

Depreciation and amortization is computed on a straight-line basis based
upon the shorter of the lease term or the estimated useful lives of the assets
ranging from 3 to 20 years for distribution systems and 5 to 10 years for
support equipment. Amortization of equipment financed under capitalized leases
is included in depreciation expense.

Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. Gains or losses are recognized at the time of
ordinary retirements, sales or other dispositions of property.

CABLE TELEVISION PROPERTY AND EQUIPMENT

Cable television equipment depreciation is computed by the straight-line
method over the estimated useful lives of the assets. The composite method and a
10 year life are used for cable television distribution systems. Under the
composite method, proceeds from the retirement of cable television distribution
system assets are credited to the allowance for depreciation. Gains or losses on
disposition of property, plant and equipment (other than cable television
distribution systems) are credited or charged to income. Maintenance and repairs
are charged to expense as incurred. Expenditures for major renewals and
betterments are capitalized.

(g) OTHER ASSETS

Intangible assets are valued at the lower of unamortized cost or fair value.
Management reviews the valuation and amortization of intangible assets on a
periodic basis, taking into consideration any events or circumstances which
might result in diminished fair value.

Goodwill represents the excess of cost over fair value of net assets
acquired and is being amortized on a straight-line basis over periods of 20 to
40 years. Goodwill and certificates of operating rights arising

F-11
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
from the 1996 acquisition of the Cable Companies are amortized using the
straight line method over forty years.

Other assets, excluding deferred loan costs, certificates of operating
rights and goodwill, are recorded at cost and are amortized on a straight-line
basis over 2 to 15 years.

The cost of the Company's PCS license and related financing costs have been
capitalized as a long-term other asset. Once the associated assets are placed
into service, the recorded cost of the license will begin being amortized over a
40 year period using the straight line method.

(h) DEFERRED LOAN COSTS

Debt issuance costs are deferred and amortized using the straight-line
method, which approximates the interest method, over the term of the related
debt.

(i) REVENUE FROM SERVICES AND PRODUCTS

Revenues generated from long distance telecommunication services are
recognized when the services are provided. Revenues from the sale of equipment
are recognized at the time the equipment is delivered or installed. Service
revenues are derived primarily from maintenance contracts on equipment and are
recognized on a prorated basis over the term of the contract.

Cable television and private line telecommunication revenues are generally
billed in advance and are recognized as the associated service is provided.

Other revenues are recognized when the service is provided.

(j) ADVERTISING EXPENSE

The Company expenses advertising costs as incurred. Advertising expenses
were approximately $3,061,000, $1,924,000 and $796,000 for 1996, 1995 and 1994,
respectively.

(k) INTEREST EXPENSE

Interest costs incurred during the construction period of significant
capital projects are capitalized. Interest capitalized by the Company totaled
$1,034,000, $112,000, and $0 during the years ended December 31, 1996, 1995, and
1994.

(l) INCOME TAXES

Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities be recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable earnings in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
recognized to the extent that the benefits are more likely to be realized than
not.

(m) STOCK OPTION PLAN

Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On

F-12
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
January 1, 1996, the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

(n) USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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. Actual results could differ from those estimates.

(o) CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash, temporary investments, and
accounts receivable. Excess cash is invested in high quality short-term liquid
money instruments issued by highly-rated financial institutions. At December 31,
1996, substantially all of the Company's cash balances were invested in
short-term liquid money instruments. Though limited to one geographical area,
the concentration of credit risk with respect to the Company's receivables is
minimized due to the large number of customers, individually small balances,
short payment terms and required deposits.

(p) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

The Company adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.

(q) RECLASSIFICATIONS

Reclassifications have been made to the 1994 and 1995 financial statements
to make them comparable with the 1996 presentation.

F-13
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) ACQUISITION OF CABLE TELEVISION SYSTEMS

Effective October 31, 1996, following shareholder and regulatory approvals,
the Company completed the acquisition of seven Alaska cable television companies
("Cable Systems"). Under the terms of the transactions, accounted for using the
purchase method, the final purchase price was $280.1 million, which was the
aggregate value for all the Cable Systems and included certain transaction and
financing costs. The purchase price included issuance of 14.7 million shares of
GCI's class A common stock and cash, debt assumption and issuance of
subordinated notes. Financing for the transactions resulted from borrowings
under a new $205 million bank credit facility and from additional capital
provided from the sale of two million shares of GCI's Class A common stock to
MCI Telecommunications Corporation for $6.50 per share.

Acquisition costs totaling $304.4 million were allocated to tangible and
identifiable intangible assets and liabilities based upon fair market values.
Approximately $206.5 million was allocated to the certificate of operating
rights and approximately $42.4 was allocated to goodwill.

Various tax attributes of Prime gave rise to a deferred tax liability (see
Note 7) of $24.4 million recorded by the Company as a result of the acquisition.

During January 1997, holders of the GCI subordinated notes exercised a
conversion option which allowed them to exchange their notes for GCI Class A
common shares at a predetermined conversion price of $6.50 per share. As a
result, the note holders will receive a total of 1,538,457 shares of GCI Class A
common stock. As of January 1997, 1,415,385 shares were issued for the converted
notes. The remaining shares will be issued upon release of the related notes
still held in escrow (see below).

The final closing required approval of the Alaska Public Utilities
Commission (APUC), which was granted on September 23, 1996. The APUC approval
included several conditions placed on the transfer, such as continuing the
existing conditions requiring provision of public access channels and requiring
the cable operations to file annual income and operating statements.

In connection with the Acquisitions, GCI placed 1,093,750 shares of GCI
Class A common stock, $800,000 of GCI subordinated notes, and $150,000 cash into
an indemnity escrow account. The various selling entities collectively placed
the same amounts in escrow. Upon satisfactory completion of the indemnity period
(180 days after each closing), the escrowed amounts will be returned to GCI and
the various sellers.

The following table sets forth for the periods indicated, in comparative
columnar form, unaudited pro forma operating data and pro forma per-share data
for the Company including operating data for Prime Cable of Alaska L.P., Alaska
Cablevision, Inc., and Alaskan Cable companies. Results of operations and per
share data, where applicable, is provided for the following items: (1) total
revenues; (2) earnings before extraordinary items; (3) cumulative effect of
accounting changes; and (4) net earnings. The pro forma information shown gives
effect to the cable company acquisitions as if they had occurred as of the
beginning of the periods presented. Company common stock issued pursuant to the
cable company acquisitions is valued at approximately $5.89 per share (the
trading price for the shares on the dates surrounding the announcement of the
transactions) for purposes of the pro forma presentation below.

The pro forma financial data are unaudited and are not necessarily
indicative of the results of operations of the Company that would have occurred
had the cable company acquisitions been

F-14
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) ACQUISITION OF CABLE TELEVISION SYSTEMS (CONTINUED)
completed as of the beginning of the earliest periods presented or of the future
results of operations of the Company.

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1996 1995
----------- ---------
(AMOUNTS IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Total revenues................................................... $ 210,762 182,308
Net earnings..................................................... $ 6,700 5,918
Net earnings per common share.................................... $ 0.16 0.14
Shares used in computation....................................... 41,604 41,149
</TABLE>

(3) CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES

Changes in operating assets and liabilities consist of (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
(Increase) decrease in trade receivables.... $ 138 (2,089) (4,604) (4,701) 63
(Increase) decrease in other receivables.... (391) 20 (134) (32) (91)
(Increase) decrease in prepaid and other
current assets............................. (52) (374) (467) (222) 312
(Increase) decrease in inventory............ (77) (34) 412 (317) (38)
(Increase) in income taxes receivable....... 0 0 (1,026) 0 0
Increase (decrease) in accounts payable..... (1,357) (22) 5,517 5,020 1,434
Increase (decrease) in accrued
liabilities................................ 96 (69) 914 423 195
Increase (decrease) in accrued payroll and
payroll related obligations................ (151) 73 1,723 (1,928) 1,238
Increase (decrease) in accrued income
taxes...................................... 0 917 (547) 330 163
Increase in accrued interest................ (2,357) 10 2,188 31 14
Increase (decrease) in deferred revenues.... (5) (120) (4) 220 (90)
(Decrease) in components of other
liabilities................................ (40) (85) (1,360) (131) (137)
--------- --------- --------- --------- ---------
$ (4,196) (1,773) 2,612 (1,307) 3,063
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

F-15
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES (CONTINUED)
Acquisitions of businesses, net of cash acquired for the year ended December
31, 1996 consists of (in thousands):

<TABLE>
<S> <C>
Fair value of assets acquired................................... $ 304,441
Bank debt and net working capital deficit assumed............... (110,538)
Common stock issued to sellers.................................. (86,710)
Convertible, subordinated debt issued to sellers................ (10,000)
Net deferred income tax liability............................... (24,375)
---------
Net cash used to acquire business............................... $ 72,818
---------
---------
</TABLE>

Income taxes paid totaled $0 and $633,000 for the three months ended March
31, 1997 and 1996, respectively, (unaudited) and $4,361,000, $3,752,000 and
$2,796,000 during 1996, 1995 and 1994, respectively.

Interest paid totaled approximately $6,300,000 and $407,000 for the three
months ended March 31, 1997 and 1996, respectively, (unaudited) and ($2,657,000,
$1,227,000 and $1,525,000 during 1996, 1995 and 1994, respectively.

The Company recorded $18,000 and $16,000 for the three months ended March
31, 1997 and 1996, respectively, (unaudited) and $187,000, $397,000 and $371,000
in 1996, 1995 and 1994, respectively, in paid-in capital in recognition of the
income tax effect of excess stock compensation expense for tax purposes over
amounts recognized for financial reporting purposes.

The holders of $10 million of convertible notes exercised their conversion
rights in January 1997 resulting in the exchange of such notes for 1,538,457
shares of the Company's Class A common stock.

F-16
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4) NOTES RECEIVABLE

A summary of notes receivable follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Note receivable from officer bearing interest at the rate paid by the
Company on its senior indebtedness, secured by GCI Class A common stock,
due on the 90th day after termination of employment or July 30, 1998,
whichever is earlier...................................................... $ 500 500

Note receivable from officer bearing interest at 10%, secured by Company
stock; payable in equal annual installments of $36,513 through August 26,
2004...................................................................... 224 224

Notes receivable from officers and others bearing interest at 7% to 10%,
unsecured and secured by Company common stock, shares of other common
stock and equipment; due on demand and through August 26, 2004............ 488 261
--------- ---------

Total notes receivable..................................................... 1,212 985

Less current portion....................................................... (325) (167)

Plus long-term accrued interest............................................ 129 86
--------- ---------

$ 1,016 904
--------- ---------
--------- ---------
</TABLE>

(5) INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
----------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Certificates of operating rights........................................ $ 206,492 0
Goodwill................................................................ 44,347 1,983
PCS license and related costs........................................... 1,913 1,802
Other intangibles....................................................... 121 439
----------- ---------
252,873 4,224
Less amortization....................................................... 1,953 1,099
----------- ---------
Intangible assets, net.................................................. $ 250,920 3,125
----------- ---------
----------- ---------
</TABLE>

F-17
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) LONG-TERM DEBT

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
----------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Senior loan (a)...................................................... $ 175,900 $ 0
Credit Agreement (b)................................................. 30,100 1,000
Convertible, subordinated notes (c).................................. 10,000 0
Undersea Fiber and Equipment Loan Agreement (d)...................... 6,886 8,271
Financing Obligation (e)............................................. 356 709
----------- ---------
223,242 9,980
Less current maturities.............................................. 31,969 1,689
----------- ---------
Long-term debt, excluding current maturities......................... $ 191,273 $ 8,291
----------- ---------
----------- ---------
</TABLE>

(a) GCI Cable entered into a credit facility totaling $205 million ("Senior
Loan") effective October 31, 1996, associated with the acquisition of the
cable companies. Loans (advances) made pursuant to the Senior Loan mature
on September 30, 2005 or such earlier date as payment of the loans are
due, whether by acceleration or otherwise.

The Senior Loan provides for interest at the bank's prime rate plus
1.875%. At GCI Cable's option, interest on all or a specified portion of
the indebtedness may be fixed for periods ranging from one to six months
based on Eurodollar rates plus 2.875%. Upon the request of GCI Cable and
the approval of the banks, the period of a Eurodollar advance can be
extended beyond six months. The interest rates under the new agreement
are subject to reductions of up to 1.75% per annum if certain financial
tests are met. GCI Cable is required to pay a commitment fee equal to
0.50% per annum on the unused portion of the commitment. In addition, if
the obligations under the Senior Loan are not repaid in full on or before
September 30, 1997, GCI Cable has agreed to pay an additional fee of
$712,500. Interest and fees are payable quarterly.

The Senior Loan facility contains, among others, covenants requiring
maintenance of specific levels of operating cash flow to indebtedness and
to interest expense. The Senior Loan facility includes limitations on
acquisitions and additional indebtedness, and prohibits any direct or
indirect distribution, dividend, redemption or other payment to any
person on account of any general or limited partnership interest in, or
shares of capital stock or other securities of GCI Cable or any of its
subsidiaries. GCI Cable was in compliance with all credit agreement
covenants during the period commencing October 31, 1996 (date of the
Senior Loan) through December 31, 1996.

While GCI Cable may elect at any time to reduce amounts due and available
under the loan agreement, a mandatory prepayment is required each May,
beginning in May 2000, if, for the prior year ended December 31, GCI
Cable's Operating Cash Flow (defined as net income before extraordinary
items and gains and losses on asset sales, plus interest expense,
depreciation, amortization, bank fees, deferred management fees, expenses
and other amounts deferred under the management agreement, income tax
expense and other non-cash expenses) exceeds payments made for cash
interest expense, permanent prepayments of principal amounts outstanding
under the loan agreement, bank fees, cash income tax payments, capital
expenditures, amounts previously deferred under the management agreement

F-18
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) LONG-TERM DEBT (CONTINUED)
and capital lease obligations. GCI Cable is required to make a prepayment
in the amount of 50% of such excess. Additionally, a mandatory prepayment
may be required in the event of asset sales (other than dispositions of
obsolete inventory and equipment in the ordinary course of business) or
the issuance of capital stock or other debt or equity securities. All
such mandatory prepayments permanently reduce the amounts due and
available under the loan commitment.

The loan agreement is collateralized by essentially all of GCI Cable
Inc.'s assets as well as a pledge of GCI Cable's stock by GCI.

In connection with the funding of the loan agreement, GCI Cable Inc. paid
bank fees and other expenses of approximately $764,000, which will be
amortized to interest expense over the life of the agreement.

(b) GCI entered into a new $62.5 million interim telephony credit facility
with its senior lender during April 1996. The interim facility replaced
in its entirety the prior senior facility described in the Company's
December 31, 1995 Form 10-K. The new facility allows the Company to
invest up to $60 million in capital expenditures through the first
quarter of 1997. The Company plans to restructure the facility prior to
its maturity on April 25, 1997. Since the entire facility matures within
the twelve-month period ending December 31, 1997, the outstanding balance
at December 31, 1996 is included in current maturities of long-term debt.

The interim facility provides for interest (7.33% weighted average
interest rate at December 31, 1996), among other options, at LIBOR plus
1.75% to 2.25%, depending on the Company's leverage ratio as defined in
the agreement. A fee of 0.50% per annum is assessed on the unused portion
of the facility.

$3.4 million of the facility has been used to provide a letter of credit
to secure payment of certain access charges associated with the Company's
provision of telecommunications services within the state of Alaska.

The interim facility contains, among others, covenants requiring
maintenance of specific levels of operating cash flow to indebtedness and
to interest expense. The credit agreement includes limitations on
acquisitions and additional indebtedness, and prohibits payment of
dividends, other than stock dividends. The Company was in compliance with
all credit agreement covenants during the period commencing April (date
of the new interim credit facility) through December 31, 1996.

Security for the credit agreement includes a pledge of the stock of GCC
and Communication Services, and a first lien on substantially all of
GCC's assets. GCI and its subsidiaries, Communication Services and
Leasing Company, are liable as guarantors.

The Company extended the maturity date of its $62.5 million interim
telephony credit facility during April 1997. The interim facility matures
in July 1997 and is expected to be extended further or refinanced prior
to that time. Since the facility matures within the twelve-month period
ending March 31, 1998, the outstanding balance at March 31, 1997 is
included in current maturities of long-term debt (unaudited).

F-19
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) LONG-TERM DEBT (CONTINUED)
In June, 1993, the Company entered into a two-year interest rate swap
agreement with a bank whereby the rate on $18,200,000 of debt (reduced by
$422,500 per quarter beginning July 1, 1993) was fixed at 4.45% plus
applicable margins. The interest effect of the difference between the
fixed rate and the three-month LIBOR rate was either added to or served
to reduce interest expense depending on the relative interest rates. The
agreement expired June 30, 1995.

(c) GCI issued subordinated notes totaling $10 million in connection with
the acquisitions described in Note 2. The notes bear simple, non
compounding interest at the lowest allowable rate of the Internal Revenue
Service under imputed interest rules in effect at closing. The notes are
subordinated to all of the Company's senior indebtedness. During January
1997, the holders of the GCI subordinated notes exercised a conversion
option which allowed them to exchange their notes for GCI Class A common
shares at a predetermined conversion price of $6.50 per share. As a
result, the former note holders received 1,538,457 shares of GCI Class A
common stock.

(d) On December 31, 1992, Leasing Company entered into a $12,000,000 loan
agreement, of which approximately $9,000,000 of the proceeds were used to
acquire capacity on the undersea fiber optic cable linking Seward, Alaska
and Pacific City, Oregon. Concurrently, Leasing Company leased the
capacity under a ten year all events, take or pay, contract to MCI, who
subleased the capacity back to the Company. The lease and sublease
agreements provide for equivalent terms of 10 years and identical monthly
payments of $200,000. The proceeds of the lease agreement with MCI were
pledged as primary security for the financing. The loan agreement
provides for monthly payments of $170,000 including principal and
interest through the earlier of January 1, 2003, or until repaid. The
loan agreement provides for interest at the prime rate plus one-quarter
percent. Additional collateral includes substantially all of the assets
of Leasing Company including the fiber capacity and a security interest
in all of its outstanding stock. MCI has a second position security
interest in the assets of Leasing Company.

(e) As consideration for MCI's role in enabling Leasing Company to finance
and acquire the undersea fiber optic cable capacity described at note
6(d) above, Leasing Company agreed to pay MCI $2,040,000 in 60 monthly
payments of $34,000. For financial statement reporting purposes, the
obligation has been recorded at its remaining present value, using a
discount rate of 10% per annum. The agreement is secured by a second
position security interest in the assets of Leasing Company.

F-20
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) LONG-TERM DEBT (CONTINUED)
As of December 31, 1996 maturities of long-term debt including mandatory
reductions of loan commitments pursuant to the Company's Senior Loan were as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1997............................................................................. $ 31,969
1998............................................................................. 1,647
1999............................................................................. 6,917
2000............................................................................. 4,497
2001............................................................................. 5,125
2002 and thereafter.............................................................. 163,087
-----------
213,242

Subordinated debt converted into GCI Class A common stock in January 1997........ 10,000
-----------
$ 223,242
-----------
-----------
</TABLE>

(7) INCOME TAXES

Total income tax expense (benefit) for the years ended December 31, 1996,
1995 and 1994 were allocated as follows:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Earnings from continuing operations............................ $ 5,228 $ 5,099 $ 4,547
Stockholders' equity, for stock option compensation expense for
tax purposes in excess of amounts recognized for financial
reporting purposes............................................ (187) (397) (371)
--------- --------- ---------
$ 5,041 $ 4,702 $ 4,176
--------- --------- ---------
--------- --------- ---------
</TABLE>

Income tax expense consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense:
Federal taxes................................................ $ 2,292 $ 3,077 $ 2,604
State taxes.................................................. 684 1,005 355
--------- --------- ---------
2,976 4,082 2,959
--------- --------- ---------
Deferred tax expense:
Federal taxes................................................ 1,734 780 816
State taxes.................................................. 518 237 772
--------- --------- ---------
2,252 1,017 1,588
--------- --------- ---------
$ 5,228 $ 5,099 $ 4,547
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-21
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)

Total income tax expense differed from the "expected" income tax expense
determined by applying the statutory federal income tax rate of 34% as follows:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Expected statutory tax expense.................................... $ 4,314 4,284 3,971
State income taxes, net of federal benefit........................ 793 820 742
Income tax effect of goodwill amortization, nondeductible
expenditures and other items, net............................... 55 41 0
Change in valuation allowance..................................... (225) (200) 0
Other............................................................. 291 154 (166)
--------- --------- ---------
$ 5,228 5,099 4,547
--------- --------- ---------
--------- --------- ---------
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1995 are presented below.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Net current deferred tax assets:
Accounts receivable, principally due to allowance for doubtful
accounts............................................................. $ 98 119
Compensated absences, accrued for financial reporting purposes......... 380 400
Workers compensation and self insurance health reserves, principally
due to accrual for financial reporting purposes...................... 243 183
Other.................................................................. 114 133
--------- ---------
Total gross current deferred tax assets.............................. 835 835
Less valuation allowance............................................. 0 89
--------- ---------
Net current deferred tax assets...................................... $ 835 746
--------- ---------
--------- ---------
</TABLE>

F-22
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Net long-term deferred tax assets:
Net operating loss carryforwards....................................... $ 23,507 0
Deferred compensation expense for financial reporting purposes in
excess of amounts recognized for tax purposes........................ 617 587
Employee stock option compensation expense for financial reporting
purposes in excess of amounts recognized for tax purposes............ 198 206
Sweepstakes award in excess of amounts recognized for tax purposes..... 211 215
Other.................................................................. 197 261
--------- ---------
Total gross long-term deferred tax assets............................ 24,730 1,269
Less valuation allowance............................................. 8,129 136
--------- ---------
Net long-term deferred tax assets.................................... 16,601 1,133
--------- ---------
Net long-term deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation.... 50,163 7,997
Other.................................................................. 158 140
--------- ---------
Total gross long-term deferred tax liabilities....................... 50,321 8,137
--------- ---------
Net combined long-term deferred tax liabilities........................ $ 33,720 7,004
--------- ---------
--------- ---------
</TABLE>

In conjunction with the acquisition of the Cable Companies the Company
incurred a net deferred income tax liability of $24,375,000 which is net of
gross deferred tax assets of $23,253,000 and a valuation allowance of
$8,129,000.

The valuation allowance for deferred tax assets was $8,129,000, $225,000 and
$425,000 as of December 31, 1996, 1995 and 1994, respectively.

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

At December 31, 1996, the Company has tax net operating loss carryforwards
of approximately $58,475,000 which will begin expiring in 2004 if not utilized.
The Company's utilization of these carryforwards is subject to certain
limitations pursuant to section 382 of the Internal Revenue Code. A valuation
allowance of $8,129,000 was recognized to offset the deferred tax assets related
to these carryforwards due to uncertainty regarding realizability. If realized,
the tax benefit for the carryforwards offset by the

F-23
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

valuation allowance will be applied to reduce goodwill and other non-current
intangibles, and then applied to reduce income tax expense.

The Company's U.S. income tax return for 1993 was selected for examination
by the Internal Revenue Service during 1995. The examination commenced during
the fourth quarter of 1995 and was completed during the second quarter of 1996.
The Company received a no change letter upon completion of the examination.

(8) STOCKHOLDERS' EQUITY

COMMON STOCK

GCI's Class A common stock and Class B common stock are identical in all
respects, except that each share of Class A common stock has one vote per share
and each share of Class B common stock has ten votes per share. In addition,
each share of Class B common stock outstanding is convertible, at the option of
the holder, into one share of Class A common stock.

After the transaction described in Note 2, MCI owns a total of 8,251,509
shares of GCI's Class A and 1,275,791 shares of GCI's Class B common stock which
on a fully diluted basis represented approximately 23% and 31% of the issued and
outstanding shares of the respective class at December 31, 1996.

After the transaction described in Note 2, the owners of the cable
television properties acquired in 1996 own a total of 14,723,077 shares of GCI's
Class A common stock which on a fully diluted basis represented approximately
40% of the issued and outstanding Class A common shares at December 31, 1996.

STOCK WARRANTS

On May 18, 1994 an officer of the Company exercised warrants. In exchange
for $114, the Company issued 160,297 and 74,028 shares of GCI Class A and Class
B common stock, respectively.

Pursuant to the terms of a stock appreciation right granted in 1988, the
Company issued to its former senior lender warrants to acquire 1,021,373 shares
of GCI Class A common stock for $.85669 per share. Warrants to purchase 600,000
shares of Class A common stock were exercised in April and May, 1991, an
additional 168,085 were exercised in September, 1991 and the remaining warrants
to purchase 253,288 shares were exercised in September and October, 1994.

STOCK OPTION PLAN

In December 1986, GCI adopted a Stock Option Plan (the "Option Plan") in
order to provide a special incentive to officers, non-employee directors, and
employees by offering them an opportunity to acquire an equity interest in GCI.
The Option Plan provides for the grant of options for a maximum of 3,200,000
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. The Option Plan is administered by GCI's Board of
Directors or a committee of disinterested persons.

The Option Plan provides that all options granted under the Option Plan must
expire not later than ten years after the date of grant. If at the time an
option is granted the exercise price is less than the market value of the
underlying common stock, the "in the money" amount at the time of grant is
expensed ratably over the vesting period of the option. Options granted pursuant
to the Option Plan are

F-24
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) STOCKHOLDERS' EQUITY (CONTINUED)
only exercisable if at the time of exercise the option holder is an employee or
non-employee director of GCI.

Information for the years 1994, 1995 and 1996 with respect to the Plan
follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE RANGE OF
EXERCISE EXERCISE
SHARES PRICE PRICES
----------- ----------- --------------
<S> <C> <C> <C>
Outstanding at December 31, 1993.................... 1,823,658 $ 2.87 $0.75-$4.00
-----------
Granted........................................... -- --
Exercised......................................... (72,459) $ 2.39 $0.75-$3.00
Forfeited......................................... (21,500) $4.00
-----------
Outstanding at December 31, 1994.................... 1,729,699 $ 2.88 $0.75-$4.00
-----------
Granted........................................... 610,000 $4.00
Exercised......................................... (40,000) $ 2.06 $1.87-$2.25
Forfeited......................................... (11,500) $4.00
-----------
Outstanding at December 31, 1995.................... 2,288,199 $ 3.19 $0.75-$4.00
-----------
Granted........................................... 321,000 $ 5.79 $3.75-$6.50
Exercised......................................... (82,291) $ 2.80 $0.75-$4.00
Forfeited......................................... (79,785) $ 3.11 $0.75-$4.50
-----------
Outstanding at December 31, 1996.................... 2,447,123 $ 3.54 $0.75-$6.50
-----------
-----------
Available for grant at December 31, 1996............ 108,338
-----------
-----------
</TABLE>

The options expire at various dates through December 2006. At December 31,
1996 and 1995, the weighted-average remaining contractual lives of options
outstanding were 6.73 and 7.15 years, respectively.

At December 31, 1996 and 1995, the number of options exercisable was
1,275,903 and 986,999, respectively, and the weighted-average exercise price of
those options was $2.85 and $2.56, respectively.

The per share weighted-average fair value of stock options granted during
1996 was $3.50 for compensatory options and $2.28 for non-compensatory options;
for 1995, the per share weighted-average fair value of non-compensatory stock
options granted was $1.62. The amounts were determined as of the options' grant
dates using a qualified binomial option-pricing model with the following
weighted-average assumptions: 1996--risk-free interest rate of 6.3% and an
expected life of eight years; 1995--risk-free interest rate of 6.25% and an
expected life of eight years.

F-25
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) STOCKHOLDERS' EQUITY (CONTINUED)
Had compensation cost for the Company's 1995 and 1996 grants for stock-based
compensation plans been determined consistent with SFAS 123, the Company's net
income and net income per common share would approximate the pro forma amounts
below (in millions except per share data):

<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
----------- -----------
<S> <C> <C>
1995:
Net earnings........................................................ $ 7,502 $ 7,438
Net earnings per common share....................................... $ 0.31 $ 0.30

1996:
Net earnings........................................................ $ 7,462 $ 7,322
Net earnings per common share....................................... $ 0.27 $ 0.26
</TABLE>

Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS 123 is not reflected in the pro forma net income amounts presented
above because compensation cost is reflected over the options' vesting period of
5 years and compensation cost for options granted prior to January 1, 1995 is
not considered.

STOCK OPTIONS NOT PURSUANT TO A PLAN

In June 1989, an officer was granted options to acquire 100,000 Class A
common shares at $.75 per share. The options vested in equal annual increments
over a five-year period and expire February, 1999.

The Company entered into an incentive agreement in June 1989 with an officer
providing for the acquisition of 85,190 remaining shares of Class A common stock
of the Company for $.001 per share exercisable through June 16, 1997. The shares
under the incentive agreement vested in equal annual increments over a
three-year period.

CLASS A COMMON SHARES HELD IN TREASURY

The Company acquired 105,111 shares of its Class A common stock in 1989 for
approximately $328,000 to fund a deferred bonus agreement with an officer of the
Company. The agreement provides that the balance is payable after the later of
a) termination of employment or b) six months after the effective date of the
agreement. In September 1995 and July 1996, the Company acquired a total of
93,970 additional shares of Class A common stock for approximately $672,000 to
fund additional deferred compensation agreements for two of its officers.

EMPLOYEE STOCK PURCHASE PLAN

In December 1986, GCI adopted an Employee Stock Purchase Plan (the "Plan")
qualified under Section 401 of the Internal Revenue Code of 1986 (the "Code").
The Plan provides for acquisition of the Company's Class A and Class B common
stock at market value. The Plan permits each employee of GCI and affiliated
companies who has completed one year of service to elect to participate in the
Plan. Eligible employees may elect to reduce their compensation in any even
dollar amount up to 10% of such compensation up to a maximum of $9,500 in 1996;
they may contribute up to 10% of their compensation with after-tax dollars, or
they may elect a combination of salary reductions and after-tax contributions.

F-26
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) STOCKHOLDERS' EQUITY (CONTINUED)
GCI may match employee salary reductions and after tax contributions in any
amount, elected by GCI each year, but not more than 10% of any one employee's
compensation will be matched in any year. The combination of salary reductions,
after tax contributions and GCI matching contributions cannot exceed 25% of any
employee's compensation (determined after salary reduction) for any year. GCI's
contributions vest over six years. Prior to July 1, 1995 employee and GCI
contributions were invested in GCI common stock and employee contributions
received up to 100% matching, as determined by the Company each year, in GCI
common stock. Beginning July 1, 1995 employee contributions may be invested in
GCI common stock, MCI common stock, Tele-Communications, Inc. common stock or
various mutual funds. Such employee contributions invested in GCI common stock
receive up to 100% matching, as determined by the Company each year, in GCI
common stock. Employee contributions invested in other than GCI common stock
receive up to 50% matching, as determined by the Company each year, in GCI
common stock. The Company's matching contributions allocated to participant
accounts totaled approximately $1,013,000, $864,000 and $792,000 for the years
ended December 31, 1996, 1995, and 1994, respectively. The Plan may, at its
discretion, purchase shares of common stock from the Company at market value or
may purchase GCI common stock on the open market.

(9) INDUSTRY SEGMENTS DATA

The Company is engaged in the provision or sale of services and products in
three principal industries: (1) long-distance telecommunication services
("long-distance services"), (2) cable television services, and, on a
pre-operating basis, (3) local telecommunication services ("local services").

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1995 1994
----------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Net sales
Long-distance services................................. $ 155,419 129,279 116,981
Cable television services.............................. 9,475 0 0
----------- --------- ---------
Total net sales...................................... $ 164,894 129,279 116,981
----------- --------- ---------
----------- --------- ---------
Operating income
Long-distance services................................. $ 15,083 13,504 12,997
Cable television services.............................. 2,196 0 0
Local services......................................... (870) 0 0
----------- --------- ---------
Total operating income............................... $ 16,409 13,504 12,997
----------- --------- ---------
----------- --------- ---------
Identifiable assets
Long-distance services................................. $ 133,780 81,377 72,744
Cable television services.............................. 62,039 0 0
----------- --------- ---------
Total identifiable assets............................ $ 195,819 81,377 72,744
----------- --------- ---------
----------- --------- ---------
Capital expenditures
Long-distance services................................. $ 37,793 8,938 10,604
Cable television services.............................. 849 0 0
----------- --------- ---------
Total capital expenditures........................... $ 38,642 8,938 10,604
----------- --------- ---------
----------- --------- ---------
</TABLE>

F-27
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(9) INDUSTRY SEGMENTS DATA (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1995 1994
----------- --------- ---------
(AMOUNTS IN THOUSANDS)
Depreciation and amortization expense
<S> <C> <C> <C>
Long-distance services................................. $ 7,189 5,993 6,639
Cable television services.............................. 2,220 0 0
----------- --------- ---------
Total depreciation and amortization expense.......... $ 9,409 5,993 6,639
----------- --------- ---------
----------- --------- ---------
</TABLE>

Reclassifications have been made to 1995 and 1994 data to make them
comparable with the 1996 presentation. Intersegment sales approximate market and
are not significant. Identifiable assets are assets associated with a specific
industry segment. Revenues derived from leasing operations are allocated to the
message and data transmission services segment. Long-distance services includes
equipment sales and service which were previously reported as a separate
segment.

The Company provides message telephone service to MCI and Sprint, major
customers (see Note 10). The Company earned revenues pursuant to a contract with
Sprint totaling approximately $18,781,000, $14,885,000 and $12,412,000 for the
years ended December 31, 1996, 1995 and 1994 respectively. Amounts receivable
from Sprint totaled $1,683,000 and $2,362,000 at December 31, 1996 and 1995,
respectively.

(10) RELATED PARTY TRANSACTIONS

Pursuant to the terms of a contract with MCI, a major shareholder of the
Company (see note 8), the Company earned revenues of approximately $29,208,000,
$23,939,000 and $19,512,000 for the years ended December 31, 1996, 1995 and
1994, respectively. Amounts receivable from MCI totaled $5,252,000 and
$4,256,000 at December 31, 1996 and 1995, respectively. The Company paid MCI for
distribution of its traffic in the lower 49 states totaling approximately
$12,224,000, $12,556,000 and $10,252,000 for the years ended December 31, 1996,
1995 and 1994, respectively.

The Company entered into a long-term capital lease agreement in 1991 with
the wife of the Company's president for property occupied by the Company. The
lease is guaranteed by the Company. The lease term is 15 years with monthly
payments increasing in $800 increments at each two year anniversary of the
lease. Monthly lease costs will increase to $16,800 effective October 1997. If
the owner sells the premises prior to the end of the tenth year of the lease,
the owner will rebate to the Company one-half of the net sales price received in
excess of $900,000. If the property is not sold prior to the tenth year of the
lease, the owner will pay the Company the greater of one-half of the appreciated
value of the property over $900,000, or $500,000. The leased asset was
capitalized in 1991 at the owner's cost of $900,000 and the related obligation
was recorded in the accompanying financial statements.

The Cable Company is a party to a Management Agreement with Prime II
Management, L.P. ("PMLP"). Certain of the Prime sellers are affiliated with
PMLP. The Management Agreement expires on October 31, 2005, however, it will be
terminated earlier upon loss of a license to operate the systems, sale of the
systems, breach of contract, or upon exercise of an option to terminate the
Management Agreement by PMLP or GCI Cable any time after October 31, 1998. Under
the terms of the Management Agreement, PMLP manages the operations of the
acquired cable television systems for fees of $1,000,000 in the first year,
$750,000 in the second year, and $500,000 thereafter (unless the agreement

F-28
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(10) RELATED PARTY TRANSACTIONS (CONTINUED)
is terminated as outlined above) and reimbursement for certain expenses. The
fees and reimbursed expenses are payable on a monthly basis. Under the terms of
the bank loan agreement (Note 6), the Cable Company must defer payment of
management fees if it fails to meet certain financial ratio covenants. Any
deferred fees bear interest at a rate of 17.5% per annum. In connection with the
agreement, the Cable Company incurred approximately $197,000 in management fees
and reimbursable expenses for the period ended December 31, 1996.

(11) LEASES

The Company leases business offices, has entered into site lease agreements
and uses certain equipment and satellite transponder capacity pursuant to
operating lease arrangements. Rental costs under such arrangements amounted to
approximately $7,364,000, $4,353,000 and $4,258,000 for the years ended December
31, 1996, 1995 and 1994, respectively.

A summary of future minimum lease payments for all leases as of December 31,
1996 follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31: OPERATING CAPITAL
- ------------------------------------------------------------------------ ----------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
1997.................................................................... $ 10,772 194
1998.................................................................... 8,211 202
1999.................................................................... 4,990 204
2000.................................................................... 3,283 211
2001.................................................................... 1,870 214
2002 and thereafter..................................................... 2,568 1,265
----------- ---------
Total minimum lease payments.......................................... $ 31,694 2,290
-----------
-----------
Less amount representing interest..................................... (1,544)
Less current maturities of obligations under capital leases............. (71)
---------
Subtotal--long-term obligations under capital leases.................... 675
Less long-term obligations under capital leases due to related parties,
excluding current maturities.......................................... (675)
---------
Long-term obligations under capital leases,excluding current
maturities............................................................ $ 0
---------
---------
</TABLE>

The leases generally provide that the Company pay the taxes, insurance and
maintenance expenses related to the leased assets.

It is expected that in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties.

F-29
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(12) DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Standards No. 107, "Disclosures about Fair Value of
Financial Instruments" ("SFAS No. 107") requires disclosure of the fair value of
financial instruments for which it is practicable to estimate that value. SFAS
No. 107 specifically excludes certain items from its disclosure requirements.
The fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than
in a forced sale or liquidation. The carrying amounts at December 31, 1996 and
1995 for the Company's financial assets and liabilities approximate their fair
values.

(13) COMMITMENTS AND CONTINGENCIES

DEFERRED COMPENSATION PLAN

During 1995, the Company adopted a non-qualified, unfunded deferred
compensation plan to provide a means by which certain employees may elect to
defer receipt of designated percentages or amounts of their compensation and to
provide a means for certain other deferrals of compensation. The Company may, at
its discretion, contribute matching deferrals equal to the rate of matching
selected by the Company. Participants immediately vest in all elective deferrals
and all income and gain attributable thereto. Matching contributions and all
income and gain attributable thereto vest over a six-year period. Participants
may elect to be paid in either a single lump sum payment or annual installments
over a period not to exceed 10 years. Vested balances are payable upon
termination of employment, unforeseen emergencies, death and total disability.
Participants are general creditors of the Company with respect to deferred
compensation plan benefits. Compensation deferred pursuant to the plan totaled
$222,000 and $340,000 as of December 31, 1996 and 1995, respectively.

SATELLITE TRANSPONDERS

The Company entered into a purchase and lease-purchase option agreement in
August 1995 for the acquisition of satellite transponders to meet its long-term
satellite capacity requirements. The balance payable upon expected delivery of
the transponders in 1998 is dependent upon a number of factors. The Company does
not expect the remaining balance payable at delivery to exceed $41 million.

SELF-INSURANCE

The Company is self-insured for losses and liabilities related primarily to
health and welfare claims up to predetermined amounts above which third party
insurance applies. A reserve of $450,000 was recorded at December 31, 1996 to
cover estimated reported losses, estimated unreported losses based on past
experience modified for current trends, and estimated expenses for investigating
and settling claims. Actual losses will vary from the recorded reserve. While
management uses what it believes is pertinent information and factors in
determining the amount of reserves, future additions to the reserves may be
necessary due to changes in the information and factors used.

LITIGATION

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

F-30
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)
CABLE SERVICE RATE REREGULATION

Beginning in April 1993, the Federal Communications Commission ("FCC")
adopted regulations implementing the Cable Television Consumer Protection and
Competition Act of 1992 ("The Cable Act of 1992"). Included are rules governing
rates charged by cable operators for the basic service tier, the installation,
lease and maintenance of equipment (such as converter boxes and remote control
units) used by subscribers to receive this tier and for cable programming
services other than programming offered on a per-channel or per-program basis
(the "regulated services"). Generally, the regulations require affected cable
systems to charge rates for regulated services that have been reduced to
prescribed benchmark levels, or alternatively, to support rates using
costs-of-service methodology.

The regulated services rates charged by the Company may be reviewed by the
State of Alaska, operating through the Alaska Public Utilities Commission
("APUC") for basic service, or by the FCC for cable programming service. Refund
liability for basic service rates is limited to a one year period. Refund
liability for cable programming service rates may be calculated from the date a
complaint is filed with the FCC until the rate reduction is implemented.

In order for the State of Alaska to exercise rate regulation authority over
the Company's basic service rates, 25% of a systems' subscribers must request
such regulation by filing a petition with the APUC. At December 31, 1996, the
State of Alaska has rate regulation authority over the Juneau system's basic
service rates. (The Juneau system serves 9% of the Company's total basic service
subscribers at December 31, 1996.) Juneau's current rates have been approved by
the APUC and there are no other pending filings with the APUC, therefore, there
is no refund liability for basic service at this time.

Complaints by subscribers relating to cable programming service rates were
filed with, and accepted by, the FCC for certain franchise areas, however,
PCOA's filings made in response to those complaints related to the period prior
to July 15, 1994 were approved by the FCC. Therefore, the potential liability
for cable programming service refunds would be limited to the period subsequent
to July 15, 1994 for these areas. Management of the Company believes that it has
complied in all material respects with the provisions of the FCC rules and
regulations and that the Company is, therefore, not liable for any refunds.
Accordingly, no provision has been made in the financial statements for any
potential refunds. The FCC rules and regulations are, however, subject to
judgmental interpretations, and the impact of potential rate changes or refunds
ordered by the FCC could cause the Company to make refunds and/or to be in
default of certain debt covenants.

In February 1996, a telecommunications bill was signed into federal law
which impacts the cable industry. Most notably, the bill allows cable system
operators to provide telephony services, allows telephone companies to offer
video services, and provides for deregulation of cable programming service rates
by 1999. Management of the Company believes the bill will not have a significant
adverse impact on the financial position or results of operations of the
Company.

F-31
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(14) SUPPLEMENTARY FINANCIAL DATA

The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
1996 QUARTER QUARTER QUARTER QUARTER YEAR
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Total revenues............................................. $ 37,969 37,199 38,664 51,062 164,894
Net earnings............................................... $ 2,137 2,150 2,140 1,035 7,462
Net earnings per share..................................... $ 0.09 0.09 0.09 0.02 0.27

FIRST SECOND THIRD FOURTH TOTAL
1995 QUARTER QUARTER QUARTER QUARTER YEAR
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Total revenues............................................. $ 29,693 31,860 33,363 34,363 129,279
Net earnings............................................... $ 1,607 1,836 2,252 1,807 7,502
Net earnings per share..................................... $ 0.07 0.08 0.09 0.07 0.31
</TABLE>

(15) SUPPLEMENTAL FINANCIAL INFORMATION

<TABLE>
<CAPTION>
1997
-----------------------------------
(UNAUDITED) LONG--
THREE-MONTHS ENDED MARCH 31, DISTANCE CABLE LOCAL COMBINED
-------- ------ ----- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Telecommunication revenues............ $ 39,225 -- -- 39,225
Cable revenues........................ -- 13,656 -- 13,656
-------- ------ ----- --------
Total revenues.................... 39,225 13,656 -- 52,881
Cost of sales and services:
Distribution costs and costs of
services............................ 23,884 -- 118 24,002
Programming and copyright costs....... -- 3,166 -- 3,166
-------- ------ ----- --------
Total cost of sales and
services........................ 23,884 3,166 118 27,168
Selling, general and administrative
expenses:
Operating and engineering............. 2,792 -- -- 2,792
Cable television, including management
fees of $271........................ -- 4,368 -- 4,368
Sales and communications.............. 2,864 -- 50 2,914
General and administrative............ 4,887 -- 369 5,256
Legal and regulatory.................. 351 -- 97 448
Bad debts............................. 426 97 -- 523
Depreciation and amortization........... 2,623 3,497 -- 6,120
-------- ------ ----- --------
Operating income (loss)........... $ 1,398 2,528 (634) 3,292
-------- ------ ----- --------
-------- ------ ----- --------
</TABLE>

F-32
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(15) SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------- --------- ---------
LONG- LONG- LONG-
DISTANCE CABLE LOCAL COMBINED DISTANCE DISTANCE
--------- --------- ----------- ----------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Telecommunication revenues......... $ 155,419 0 0 155,419 129,279 116,981
Cable revenues..................... 0 9,475 0 9,475 0 0
--------- --------- --- ----------- --------- ---------
Total revenues................... 155,419 9,475 0 164,894 129,279 116,981
--------- --------- --- ----------- --------- ---------
Cost of sales and services:
Distribution costs and costs of
services......................... 90,597 0 0 90,597 72,091 63,877
Programming and copyright costs.... 0 2,067 0 2,067 0 0
--------- --------- --- ----------- --------- ---------
Total cost of sales and
services....................... 90,597 2,067 0 92,664 72,091 63,877
Selling, general and administrative
expenses:
Operating and engineering.......... 9,095 0 92 9,187 9,182 7,607
Cable television, including
management fees of $197.......... 0 2,992 0 2,992 0 0
Sales and communications........... 13,013 0 28 13,041 9,865 7,040
General and administrative......... 17,349 0 316 17,665 15,645 16,658
Legal and regulatory............... 1,357 0 434 1,791 1,540 1,334
Bad debts.......................... 1,736 0 0 1,736 1,459 829
Depreciation and amortization...... 7,189 2,220 0 9,409 5,993 6,639
--------- --------- --- ----------- --------- ---------
Operating income (loss).......... $ 15,083 2,196 (870) 16,409 13,504 12,997
--------- --------- --- ----------- --------- ---------
--------- --------- --- ----------- --------- ---------
</TABLE>

F-33
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Partners
Prime Cable of Alaska, L.P.

We have audited the accompanying balance sheets of Prime Cable of Alaska,
L.P. (the Partnership) as of December 31, 1995 and 1994, and the related
statements of operations, changes in partners' capital deficiency, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Prime Cable of Alaska, L.P.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

/s/ ERNST & YOUNG LLP

Austin, Texas
March 18, 1996, except for the
last paragraph of Note 7, as to
which the date is September 9, 1996

F-34
<PAGE>
PRIME CABLE OF ALASKA, L.P.

BALANCE SHEETS

ASSETS (NOTE 6)

<TABLE>
<CAPTION>
(UNAUDITED) DECEMBER 31,
JUNE 30, ------------------------
1996 1995 1994
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................................. $ 803 $ 9,477 $ 8,375
Accounts receivable, net (Note 4)......................................... 956 1,221 1,204
Prepaid expenses.......................................................... 196 166 227
Inventories............................................................... 854 833 324
Property, plant and equipment, at cost:
Cable television distribution systems................................... 69,695 68,090 63,819
Transportation equipment................................................ 910 848 775
Furniture and fixtures.................................................. 2,306 1,864 1,760
Land and buildings...................................................... 487 487 487
------------ ----------- -----------
73,398 71,289 66,841
Less accumulated depreciation........................................... (45,770) (42,114) (34,975)
------------ ----------- -----------
Net property, plant and equipment..................................... 27,628 29,175 31,866
Intangible assets, net (Note 5)........................................... 28,397 33,080 42,447
Deferred debt issuance costs, net......................................... 2,209 125 832
Other assets.............................................................. 181 64 28
------------ ----------- -----------
Total assets.......................................................... $ 61,224 $ 74,141 $ 85,303
------------ ----------- -----------
------------ ----------- -----------

LIABILITIES AND PARTNERS' CAPITAL DEFICIENCY

Accounts payable.......................................................... $ 583 $ 773 $ 809
Accounts payable, affiliates.............................................. 907 186 124
Accrued interest.......................................................... 2,061 1,368 1,311
Other accrued expenses.................................................... 2,086 1,639 1,656
Subscriber deposits and unearned income................................... 2,060 2,043 1,796
Term debt (Note 6)........................................................ 103,000 82,565 84,065
Subordinated debt (Note 7)................................................ 4,320 34,041 27,689
------------ ----------- -----------
Total liabilities..................................................... 115,017 122,615 117,450
------------ ----------- -----------

Commitments and Contingencies (Notes 7 and 9)

Partners' capital deficiency (Note 7):
General partners........................................................ 9,000 9,000 9,000
Limited partners........................................................ 36,000 36,000 36,000
Accumulated deficit....................................................... (98,793) (93,474) (77,147)
------------ ----------- -----------
Total partners' capital deficiency.................................... (53,793) (48,474) (32,147)
------------ ----------- -----------
Total liabilities and partners' capital deficiency.................... $ 61,224 $ 74,141 $ 85,303
------------ ----------- -----------
------------ ----------- -----------
</TABLE>

The accompanying notes are an integral
part of the financial statements.

F-35
<PAGE>
PRIME CABLE OF ALASKA, L.P.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS YEARS
ENDED JUNE 30, ENDED DECEMBER 31,
-------------------- ----------------------
1996 1995 1995 1994
--------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues......................................................... $ 17,276 $ 16,100 $ 32,594 $ 30,599

Operating expenses:
Cable television system expenses............................... 8,668 8,150 16,264 14,911
Management fees and expenses (Note 9).......................... 924 817 1,674 1,671
Depreciation and amortization.................................. 8,410 8,208 16,487 16,944
Provision for inventory obsolescence........................... -- -- -- 35
--------- --------- ---------- ----------
Loss from operations............................................. (726) (1,075) (1,831) (2,962)

Interest income.................................................. 131 207 460 285
Interest expense................................................. (4,736) (5,349) (14,960) (9,035)
Gain (loss) on disposal of assets................................ 12 4 4 (15)
--------- --------- ---------- ----------
Net loss......................................................... $ (5,319) $ (6,213) $ (16,327) $ (11,727)
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>

The accompanying notes are an integral
part of the financial statements.

F-36
<PAGE>
PRIME CABLE OF ALASKA, L.P.

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL DEFICIENCY

<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Balances, January 1, 1994..................................................... $ (20,420) $ -- $ (20,420)
Net loss for the year ended December 31, 1994............................... (11,727) -- (11,727)
---------- ----- ----------
Balances, December 31, 1994................................................... (32,147) -- (32,147)
Net loss.................................................................... (16,327) -- (16,327)
---------- ----- ----------
Balances, December 31, 1995................................................... (48,474) -- (48,474)
Net loss (unaudited)........................................................ (5,319) -- (5,319)
---------- ----- ----------
Balances, June 30, 1996 (unaudited)........................................... $ (53,793) $ -- $ (53,793)
---------- ----- ----------
---------- ----- ----------
</TABLE>

The accompanying notes are an integral
part of the financial statements.

F-37
<PAGE>
PRIME CABLE OF ALASKA L.P.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
(UNAUDITED) YEARS
SIX MONTHS ENDED
ENDED JUNE 30, DECEMBER 31,
---------------------- ----------------------
1996 1995 1995 1994
----------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................... $ (5,319) $ (6,213) $ (16,327) $ (11,727)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................... 8,410 8,208 16,487 16,944
Amortization of deferred debt issuance costs................ 170 352 708 500
Deferred interest on subordinated debt...................... 401 985 6,352 1,802
Provision for inventory obsolescence........................ -- -- -- 35
(Gain) loss on disposal of assets........................... (12) (4) (4) 15
----------- --------- ---------- ----------
3,650 3,328 7,216 7,569
Net decrease (increase) in accounts receivable, prepaid
expenses and other assets................................... 118 338 8 (355)
Net increase (decrease) in accounts payable, accounts
payable-affiliates, accrued interest, other accrued
expenses, and subscriber deposits and unearned income....... 1,688 (14) 313 1,236
----------- --------- ---------- ----------
Net cash provided by operating activities..................... 5,456 3,652 7,537 8,450
----------- --------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment and inventories..... (2,201) (2,821) (4,988) (4,021)
Proceeds from sale of assets.................................. 12 54 54 10
----------- --------- ---------- ----------
Net cash used in investing activities......................... (2,189) (2,767) (4,934) (4,011)
----------- --------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank debt borrowings............................ 105,000 -- -- --
Repayment of term debt........................................ (84,565) -- (1,500) (4,330)
Prepayment of subordinated debt............................... (30,122) -- -- --
Increase in deferred debt issuance cost....................... (2,254) -- (1) (646)
----------- --------- ---------- ----------
Net cash used in financing activities......................... (11,941) -- (1,501) (4,976)
----------- --------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (8,674) 885 1,102 (537)
Cash and cash equivalents, beginning of period................ 9,477 8,375 8,375 8,912
----------- --------- ---------- ----------
Cash and cash equivalents, end of period...................... $ 803 $ 9,260 $ 9,477 $ 8,375
----------- --------- ---------- ----------
----------- --------- ---------- ----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash interest paid............................................ $ 3,472 $ 3,912 $ 7,843 $ 6,330
----------- --------- ---------- ----------
----------- --------- ---------- ----------
</TABLE>

The accompanying notes are an integral
part of the financial statements.

F-38
<PAGE>
PRIME CABLE OF ALASKA, L.P.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

Prime Cable of Alaska, L.P. (the "Partnership"), a Delaware limited
partnership, was formed on January 30, 1989 to acquire and operate cable
television systems serving the municipality of Anchorage and its environs, Fort
Richardson, Elmendorf Air Force Base, the city of Bethel and its environs, and
the city of Kenai and the Kenai Peninsula Borough, all in the state of Alaska
(the "Alaska Systems"). The Partnership was capitalized with contributions
totaling $9,000,000 from the general partners, Prime Cable Fund I, Inc., Prime
Cable Fund II, Inc. and Prime Cable Fund III, Inc., and contributions from the
limited partners, Alaska Cable Inc. ("Alaska Cable"), Prime Cable Growth
Partners, L.P. and Prime Venture I Holdings, L.P. in the amounts of $23,000,000,
$11,000,000 and $2,000,000, respectively.

The partnership agreement calls for losses to be allocated 97% to the
general partners and 3% to the limited partners until the general partners'
capital accounts have been reduced to zero. Thereafter, losses are allocated
entirely to the limited partners until sufficient losses have been allocated to
reduce limited partner capital accounts to zero. Finally, remaining losses are
allocated to the general partners.

Profits will be allocated first to those partners with capital account
deficits, in proportion to their respective deficit balances. Second, profits
will be allocated to all partners based on respective capital contributions
until the capital accounts have been restored to the amount of each partner's
capital contribution less any distributions. Profits in excess of capital
contributions less distributions remaining from the sale of all, or
substantially all, of the assets of the Partnership will be allocated to the
partners in proportion to their respective capital contributions after first
being reduced by amounts paid to the corporate limited partner and to the
subordinate debt holders as described in Note 7.

As of June 30, 1995 certain shareholders of Alaska Cable can require the
sale of the Partnership for any reason.

The Partnership has a $10 investment, representing a .165% limited
partnership capital interest in Prime Video, L.P. ("PVLP"). PVLP was organized
to acquire, develop and operate Blockbuster Video Superstores, and has 19 stores
in operation at December 31, 1995. The Partnership's investment is accounted for
using the cost method, the results of which do not differ significantly from the
equity method. Through December 1995, the Partnership has received distributions
totaling $7,000 from PVLP.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

Inventories are carried at the lower of cost (weighted average unit cost) or
market.

PROPERTY, PLANT AND EQUIPMENT

Depreciation is computed by the straight-line method over the estimated
useful lives of the assets. The composite method and a ten year life are used
for cable television distribution systems. Under the composite method, proceeds
from the retirement of cable television distribution system assets are credited
to the allowance for depreciation. Gains or losses on disposition of property,
plant and equipment (other than cable television distribution systems) are
credited or charged to income. Maintenance and repairs are charged to expense as
incurred. Expenditures for major renewals and betterments are capitalized.

F-39
<PAGE>
PRIME CABLE OF ALASKA, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS

Excess cost over net assets acquired arising from the acquisition of cable
television systems is being amortized by the straight line method over ten
years. Other intangible assets, including subscriber lists and a Certificate of
Operating Rights, are being amortized by the straight line method over their
useful lives ranging from ten to eleven years.

It is the Partnership's policy to value intangible assets at the lower of
unamortized cost or fair value. Management reviews the valuation and
amortization of intangible assets on a periodic basis, taking into consideration
any events or circumstances which might result in diminished fair value.

DEFERRED DEBT ISSUANCE COSTS

Debt issuance costs are deferred and amortized by the straight-line method,
which approximates the interest method, over the term of the related debt.

REVENUE RECOGNITION

Revenues are generally billed in advance and are recognized as the cable
service is provided.

ADVERTISING EXPENSE

The Partnership expenses advertising costs as incurred. Advertising
expenses, net of reimbursements, were approximately $660,000 and $674,000 for
1995 and 1994, respectively.

INCOME TAXES

The Partnership as an entity pays no income taxes, although it is required
to file federal and state income tax returns for informational purposes only.
All income or loss "flows through" to the individual partners in the manner
specified in the partnership agreement.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Partnership to
concentrations of credit risk are primarily cash, temporary investments, and
accounts receivable. Excess cash is invested in high quality short-term liquid
money instruments issued by highly-rated financial institutions. At December 31,
1995, substantially all of the Partnership's cash balances were invested in
short-term liquid money instruments. Though limited to one geographical area,
the concentration of credit risk with respect to the Partnership's receivables
is minimized due to the large number of customers, individually small balances,
short payment terms and required deposits.

STATEMENTS OF CASH FLOWS

For purposes of the Statements of Cash Flows, the Partnership considers all
highly liquid investments with a maturity of three months or less, when
acquired, to be cash equivalents.

F-40
<PAGE>
PRIME CABLE OF ALASKA, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES

3. ACQUISITION OF CABLE TELEVISION SYSTEMS

On June 30, 1989, the Partnership acquired the Alaska Systems for an
aggregate purchase price including acquisition expenses of $143,843,000. For
financial statement purposes, the acquisition was accounted for using the
purchase method with the acquisition cost allocated to the tangible and
identifiable intangible assets based upon current fair market values. The
allocation resulted in an excess of cost over net assets acquired of
$24,204,000.

On October 1, 1989, the cable television system in the Eaglewood subdivision
of Anchorage was acquired by the Partnership for $541,000, including acquisition
expenses. The acquisition was accounted for as a purchase transaction with the
acquisition cost allocated to the tangible and identifiable intangible assets of
the system based upon current fair market values. This allocation resulted in an
excess of cost over net assets acquired of $217,000.

4. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following (thousands of dollars):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Accounts receivable, trade............................................... $ 1,333 $ 1,402
Accounts receivable, other............................................... 117 69
Less allowance for doubtful accounts..................................... (229) (267)
--------- ---------
Accounts receivable, net of allowance.................................... $ 1,221 $ 1,204
--------- ---------
--------- ---------
</TABLE>

5. INTANGIBLE ASSETS

Intangible assets consisted of the following (thousands of dollars):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Subscriber list...................................................... $ 34,821 $ 34,821
Certificate of Operating Rights...................................... 29,019 29,019
Excess of acquisition costs over net assets acquired................. 24,421 24,421
Other intangibles.................................................... 5,775 5,775
---------- ----------
94,036 94,036
Less accumulated amortization........................................ (60,956) (51,589)
---------- ----------
Intangible assets, net............................................... $ 33,080 $ 42,447
---------- ----------
---------- ----------
</TABLE>

F-41
<PAGE>
PRIME CABLE OF ALASKA, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. BANK DEBT

Bank debt consisted of the following (thousands of dollars):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Bank credit agreement:
Tranche A Note....................................................... $ 65,065 $ 66,565
Tranche B Note....................................................... 17,500 17,500
--------- ---------
$ 82,565 $ 84,065
--------- ---------
--------- ---------
</TABLE>

The rates of interest on amounts outstanding under the bank loan agreement
at December 31, 1995 were fixed under three-month Eurodollar contracts at 7.2%
and 7.9% for the Tranche A Note and the Tranche B Note, respectively.

On March 7, 1996, the Partnership consummated a new bank loan agreement
using the proceeds to pay off all amounts outstanding under the previous bank
credit agreement and subordinated notes (Note 7). The Partnership has
$125,000,000 available under the new loan agreement, with borrowings bearing
interest at the bank's prime rate plus 2%. At the Partnership's option, all or a
specified portion of the indebtedness may be fixed for periods ranging from one
month to one year based on Eurodollar rates plus 3%. The interest rates under
the new agreement are subject to reductions of up to 1.75% per annum if certain
financial tests are met. The Partnership is required to pay a commitment fee
equal to .5% per annum on the unused portion of the commitment, and an agency
fee of $50,000 per year. Interest and fees are payable quarterly.

Beginning June 30, 1998, the loan commitment is reduced at the end of each
calendar quarter through March 31, 2005 as follows:

<TABLE>
<CAPTION>
QUARTERLY REDUCTION
OF LOAN COMMITMENT
---------------------
<S> <C>
1998......................................................... $ 4,166,667
1999......................................................... $ 3,125,000
2000......................................................... $ 3,125,000
2001......................................................... $ 3,125,000
2002......................................................... $ 4,687,500
2003......................................................... $ 4,687,500
2004......................................................... $ 6,250,000
2005......................................................... $ 12,500,000
</TABLE>

While the Partnership may elect to reduce amounts due and available under
the loan agreement through prepayments of not less than $1,000,000, a mandatory
prepayment is required each May, beginning in May 1999, if, for the prior year
ended December 31, the Partnership's Operating Cash Flow (defined as net income
before extraordinary items and gains and losses on asset sales, plus interest
expense, depreciation, amortization, bank fees, deferred management fees,
expenses and other amounts deferred under the management agreement (Note 8),
income tax expense, partnership expenses not to exceed $75,000 per annum, and
other non-cash expenses) exceeds payments made for cash interest expense,
permanent prepayments of principal amounts outstanding under the loan

F-42
<PAGE>
PRIME CABLE OF ALASKA, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. BANK DEBT (CONTINUED)
agreement, bank fees, cash income tax payments, capital expenditures, amounts
previously deferred under the management agreement, and capital lease
obligations. The Partnership is required to make a prepayment in the amount of
50% of such excess. Additionally, a mandatory prepayment may be required in the
event of asset sales (other than dispositions of obsolete inventory and
equipment in the ordinary course of business), the issuance of partnership
interests or other debt or equity securities, or in the event of certain changes
in ownership of the Partnership. All such mandatory prepayments permanently
reduce the amounts due and available under the loan commitment.

The loan agreement is collateralized by essentially all of the Partnership's
assets, the general partners' interests in the Partnership, and a pledge by PMLP
of its rights under the management agreement. The loan agreement imposes
numerous requirements and restrictions, including limitations on indebtedness,
payments, purchases and capital expenditures. In addition, certain financial
ratios must be maintained.

In connection with the initial funding under the March 7, 1996 loan
agreement, the Partnership paid bank fees of approximately $2,144,000, which
will be amortized to interest expense over the life of the agreement. Additional
bank fees equal to .5% of the commitment are due upon the occurrence of certain
changes in ownership of the Partnership, but in no event later than September 7,
1997.

7. SUBORDINATED DEBT

Subordinated debt consisted of the following (thousands of dollars):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Subordinated notes:
Original principal amount outstanding.................................. $ 20,000 $ 20,000
Deferred interest...................................................... 14,041 7,689
--------- ---------
$ 34,041 $ 27,689
--------- ---------
--------- ---------
</TABLE>

On June 30, 1989, the Partnership entered into an investment agreement to
issue subordinated notes with an original principal amount of $20,000,000. The
notes bear interest at 12.25%, with 7.25% payable quarterly and the remainder
deferred. Interest deferred each quarter bears interest at 12.25% and is payable
at maturity.

On March 7, 1996, the Partnership used $30,387,000 in proceeds from the bank
loan agreement (Note 6) to prepay in full the amounts outstanding under the
subordinated notes. The investment agreement remained in force.

Under the investment agreement, the subordinated debt holders also were
issued profit participation rights entitling them to receive the Profit
Participation Amount (defined as 13.6284% multiplied by the excess of the fair
market value of the Partnership over the sum of (1) the $45,000,000 original
equity contributed to the Partnership, reduced by distributions, plus (2) the
amount of the tax allocation to the corporate limited partner which provides the
corporate limited partner an after-tax return equivalent to the other limited
partners). The holders of profit participation rights have right of first
refusal on a portion of the issuance of additional partnership interests by the
Partnership.

F-43
<PAGE>
PRIME CABLE OF ALASKA, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. SUBORDINATED DEBT (CONTINUED)
The holders of the profit participation rights may elect at any time to put
all or any portion of their rights to the Partnership. In the event that the
Partnership is unable to purchase their rights, the holders can require the
liquidation of the Partnership. At any time after June 30, 1996, but prior to
June 30, 1998, the Partnership may, by notice to the holders, require them to
sell all or any portion of their profit participation rights to the Partnership.
Under the put and call agreements, the purchase price of the rights shall be
based on the Profit Participation Amount multiplied by the percentage of rights
sold. Any payments to the holders of the profit participation rights are
subordinate to payment of amounts due under the new March 7, 1996 bank loan
agreement (Note 6).

At each balance sheet date, management of the Partnership estimates fair
market value of the Partnership to determine the Profit Participation Amount.
Based upon such estimates, the Partnership recorded a liability of $4,320,000 to
the holders of the profit participation rights in 1995. This amount was charged
to interest expense and recorded as additional deferred interest on the
subordinated debt in the financial statements for 1995, which have been restated
to include this expense and liability. Such amount will be paid upon the sale of
the partnership interests (see Note 9).

8. COMMITMENTS AND CONTINGENCIES

LEASE ARRANGEMENTS

The Partnership, as an integral part of its operations, has entered into
operating lease contracts for microwave service, pole use and office space. The
approximate minimum aggregate rentals under such leases (exclusive of minimum
pole rentals of approximately $142,000 per year) at December 31, 1995, are as
follows: 1996, $462,000; 1997, $454,000; 1998, $451,000; 1999, $471,000; 2000,
$486,000 and $332,000 thereafter. Rent expense was $571,000, $556,000, and
$460,000, for the years ended December 31, 1995, 1994 and 1993, respectively.

MANAGEMENT AGREEMENT

The Partnership is a party to a management agreement with PMLP, an affiliate
of the general partners. Under the terms of the management agreement, PMLP
manages all aspects of the daily operations of the cable television systems. In
consideration for its services to the Partnership, PMLP receives annual fees
equal to 5% of the gross revenues of the Partnership and is reimbursed for
certain expenses incurred in connection with the services provided. Under the
terms of the March 7, 1996 bank loan agreement (Note 6), the Partnership will
defer payment of the 5% fees until October 1, 1996. The deferred fees bear
interest at a rate of 17.5% per annum, and may be paid to PMLP upon the
achievement of certain financial ratios. In addition, the terms of the bank loan
agreement restrict payments to PMLP in the event of a default under the credit
agreement.

In connection with the agreement, the Partnership incurred $1,674,000,
$1,671,000, and $1,542,000, in management fees and reimbursable expenses for the
years ended December 31, 1995, 1994 and 1993, respectively.

EMPLOYEE BENEFIT PLAN

The Partnership participates with other affiliated entities in a defined
contribution pension plan covering substantially all full-time employees who
have completed one year of service. The plan is subject to the provisions of
Internal Revenue Code Sec. 401(k). Contributions by the Partnership are

F-44
<PAGE>
PRIME CABLE OF ALASKA, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
determined as a percent of each participating employee's contributions and are
at the discretion of the plan's sponsor, PMLP. Partnership contributions totaled
$33,000, $29,000, and $21,000, for fiscal years 1995, 1994 and 1993,
respectively.

LITIGATION

The Partnership is involved in various lawsuits and legal proceedings which
have arisen in the normal course of business, including the following: Two
former employees filed separate lawsuits related to the Partnership's employment
practices, with claims for damages aggregating approximately $650,000, with one
action including an unspecified claim for punitive damages. Two suits have been
filed against the Partnership related to automobile accidents, one making damage
claims aggregating approximately $550,000, the other claiming damages in an
unspecified amount. However, any damages ultimately assessed or settlements
negotiated under these two automobile accident claims will be paid by the
Partnership's insurance carrier. While the ultimate results of these matters
cannot be predicted with certainty, management does not expect them to have a
material adverse effect on the financial position or results of operations of
the Partnership, and therefore no provision for liability has been made in the
financial statements.

CABLE SERVICE RATE REREGULATION

On April 1, 1993, the Federal Communications Commission ("FCC") adopted
rules governing rates charged by cable operators for the basic service tier of
channels, the installation, lease and maintenance of equipment (such as
converter boxes and remote control units) used by subscribers to receive this
tier, and for cable programming services other than programming offered on a
per-channel or per-program basis (the "regulated services"). To comply with the
regulations, the Partnership implemented various subscriber service and rate
changes effective September 1, 1993. These changes resulted in a reduction of
total monthly revenue of approximately 6%.

On March 30, 1994, the FCC released revisions to its April 1, 1993 rate
regulations. The revisions required cable operators to implement additional rate
rollbacks using complex benchmark calculations, or alternatively, to justify
higher rates based on a cost-of-service showing. The Partnership elected to file
cost-of-service showings with the FCC where required. Management of the
Partnership believes that rates in effect at March 1994 were supportable under
the cost-of-service rules, and therefore, no rate rollbacks were implemented in
connection with the 1994 FCC revisions. Subsequent rate adjustments have been
made utilizing cost-of-service methodology with adjustments as provided by FCC
rules.

The regulated services rates charged by the Partnership may be reviewed by
the State of Alaska under certain conditions (for basic service) or the FCC (for
cable programming service). Refund liability for basic service rates is limited
to a one-year period. In order for the State of Alaska to exercise rate
regulation authority over the Partnership's basic service rates, 25% of the
Alaska Systems' subscribers must request such regulation by filing a petition
with the State of Alaska. At December 31, 1995, the State of Alaska does not
have rate regulation authority over the Partnership's basic service rates, and
therefore there is no refund liability for basic service at this time. Refund
liability for cable programming service rates may be calculated from the date a
complaint alleging an unreasonable rate for cable programming service is filed
with the FCC until the rate reduction is implemented. Complaints by subscribers
have been filed with, and accepted by, the FCC for certain franchise areas.
However, the Partnership's filings made in response to those complaints related
to the period prior to July 15, 1994 have been approved by

F-45
<PAGE>
PRIME CABLE OF ALASKA, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
the FCC; therefore, the potential liability for cable programming service
refunds would be limited to the period subsequent to July 15, 1994 for these
areas. Management of the Partnership believes that the potential for any refund
liability for cable programming service is remote, and therefore no provision
has been made in the financial statements for such refunds.

Management of the Partnership believes that it has complied in all material
respects with the provisions of the FCC rules and regulations and that the
Partnership is, therefore, not liable for any refunds. Accordingly, no provision
has been made in the financial statements for any potential refunds. The FCC
rules and regulations are, however, subject to judgmental interpretations, and
the impact of potential rate changes or refunds ordered by the FCC could cause
the Partnership to make refunds and/ or to be in default on certain debt
covenants.

In February 1996, a telecommunications bill was signed into federal law
which significantly impacts the cable industry. Most notably, the bill allows
cable system operators to provide telephony services, allows telephone companies
to offer video services, and provides for deregulation of cable programming
service rates by 1999. The impact of the new bill cannot be determined at this
time, but it is not expected to have a significant adverse impact on the
financial position or results of operations of the Partnership.

9. SUBSEQUENT EVENT

The Partners of the Partnership have signed a letter of intent to sell the
Partnership to General Communication, Inc. (GCI). GCI is a telecommunications
company providing long distance services in Alaska. A definitive agreement is
expected to be signed in the second quarter of 1996. Under the terms of the
letter of intent, the non-corporate partners would sell their partnership
interests, the shareholders of the corporate partners would exchange their
corporate shares, and the holders of the profit participation rights (see Note
7) would receive settlement of the Profit Participation Amount, all for a total
consideration of 11.8 million shares of GCI common stock.

F-46
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION FOR PRIME CABLE

Prime management's discussion of the financial condition of Prime must be
addressed in the context of regulatory changes in the form of the 1996 Telecom
Act, the 1992 Cable Act, and the Communications Act discussed elsewhere in this
Prospectus.

TWO YEARS ENDED DECEMBER 31, 1995

As of December 31, 1995, the Prime Cable passed more than 106,000 homes and
served more than 53,000 residential subscribers and 12,000 non-standard
residential and business connections, including individual dwelling units in
apartment complexes and hotels which are billed under bulk billing arrangements.
Prime had approximately 63,000 subscriptions to premium service units.

RESULTS OF OPERATIONS. Revenues totaled $32.6 million and $30.6 million
during the years ended December 31, 1995 and 1994 respectively. The 6.5% growth
in 1995 as compared to 1994 resulted primarily from increases in the number of
subscribers, primarily as a result of additional homes passed and increases in
the number of subscriptions for services. Approximately $356,000 of the growth
in 1995 revenues was due to increases in regulated service rates implemented in
January, 1995. Average monthly revenue per account was approximately $40.17 and
$39.92 in 1995 and 1994, respectively, representing an increase of approximately
0.6%. Revenues were primarily generated from subscription fees, installation
charges, and subscriber cable equipment rentals.

Cable television system expenses, representing costs directly attributable
to providing cable services to customers, increased 9.1% in 1995 as compared to
1994. The increases result from increased business activity resulting from the
growth in the number of subscribers and increased programming costs.

Prime pays management fees plus associated reimbursable expenses under the
present Prime management agreement with its manager. The management fee is based
on a percentage of gross revenues. Management fees and reimbursable expenses for
the each of the years ended December 31, 1995 and 1994 were $1.7 million.

EBITDA as a percentage of revenues decreased from 45.7% to 45.0% during the
year ended December 31, 1995 compared to the corresponding period of 1994. The
decrease was primarily caused by an increase in cable television system expenses
that on a percentage basis exceeded the corresponding increase in revenues.

Depreciation and amortization expense was $16.5 million and $16.9 million
for the years ended December 31, 1995 and 1994, respectively. The 1995 decrease
as compared to 1994 resulted from certain tangible and intangible assets
becoming fully amortized.

Interest expense was $15.0 million and $9.0 million for the years ended
December 31, 1995 and 1994, respectively. The increases, except for that
described below, were primarily attributable to increases in interest rates
throughout the period and amortization of additional deferred loan costs related
to amendments of Prime's prior agreement. Approximately $4.4 million of the 1995
increase results from accrual of the December 31, 1995 profit participation
amount (equity participation interest) as further described in Note 7 to Prime's
accompanying December 31, 1995 financial statements.

Prime, as a partnership entity, pays no income taxes, although it is
required to file federal and state income tax returns for informational purposes
only. All income or loss "flows through" to the individual partners.

Certain of Prime's expenses, such as those for wages and benefits, equipment
repair and replacement, and billing and marketing generally increase with
inflation.

F-47
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operating activities
decreased $913,000 to $7.54 million for the year ended December 31, 1995
compared to the corresponding period of 1994 resulting primarily from increases
in interest expense.

Cash used in investing activities increased $923,000 to $4.93 million for
the year ended December 31, 1995 compared to the corresponding period of 1994,
primarily due to expenditures related to plant upgrades in 1995.

Cash used in financing activities decreased from $4.98 million to $1.5
million for the year ended December 31, 1995 compared to the corresponding
period of 1994 related primarily to reduced debt repayment in 1995 as compared
to 1994.

Prime's primary need for capital has been to finance plant extensions,
rebuilds and upgrades and to add addressable converters to certain cable
systems. Prime spent $5.0 million during 1995 on capital expenditures and
currently intends to spend approximately $4.6 million in 1996 for capital
expenditures, including $820,000 to extend its service areas.

On March 7, 1996, Prime consummated the bank credit agreement using the
proceeds to pay off all amounts outstanding under the previous bank credit
agreement and subordinated notes. Prime has up to $125 million available under
the commitment in the new loan agreement, with available borrowing levels based
on debt to operating cash flow ratios as specified in the loan agreement.
Borrowings bear interest at the bank's prime rate plus 2%.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

As of June 30, 1996, the Prime Cable passed more than 107,000 homes and
served more than 52,000 residential subscribers and 12,000 non-standard
residential and business connections, including individual dwellings units in
apartment complexes and hotels which are billed under bulk billing arrangements.
Prime had approximately 51,000 subscriptions to premium service units.

RESULTS OF OPERATIONS. Revenues totaled $17.3 million for the six months
ended June 30, 1996, and $16.1 million for the six months ended June 30, 1995.
The 7.3% growth for the six months result primarily from increases in the number
of subscribers as a result of additional homes passed and increases in the
number of subscriptions for services as well as a rate increase implemented
effective December 15, 1995. Average monthly revenue per account was
approximately $42.17 and $40.67 for the six months ended June 30, 1996 and 1995,
respectively. This represents an increase of approximately 3.7% for the six
months ended June 30, 1996 compared to the corresponding periods of 1995.
Revenues were primarily generated from subscription fees, installation charges,
and subscriber cable equipment rentals.

Cable television system expenses, representing costs directly attributable
to providing cable services to customers, increased 6.4% for six months ended
June 30, 1996 compared to the corresponding periods of 1995. This resulted from
increased business activity attributed to growth in the number of subscribers
and increased programming costs.

Prime paid management fees plus associated reimbursable expenses under a
management agreement. Management fees and reimbursable expenses were $924,000
and $817,000 for the six months ended June 30, 1996 and 1995, respectively.

EBITDA increased to 44.5% from 44.3% for the 6 months ended June 30, 1996
compared to the corresponding period of 1995. The increases were primarily
caused by an increase in cable television system gross margin resulting from the
December 15, 1995 rate increase to subscribers.

Depreciation and amortization expense was $8.4 million and $8.2 million for
the six months ended June 30, 1996 and 1995, respectively. The increase results
from additional purchases of property, plant and equipment.

F-48
<PAGE>
Interest expense totaled $4.7 million and $5.4 million for the six months
ended June 30, 1996 and 1995, respectively. The 1996 decrease was primarily
attributable to lower total borrowings and lower effective interest rates in
1996 compared to 1995.

Prime, as a partnership entity, pays no income taxes although it is required
to file federal and state income tax returns for informational purposes only.
All income or loss "flow through" to the individual partners.

Certain of Prime's expenses, such as those for wages and benefits, equipment
repair and replacement and billing and marketing generally increase with
inflation.

LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operating activities
increased $1.8 million for the six months ended June 30, 1996, compared to the
corresponding period of 1995. The increase results primarily from a timing
difference in the payment of interest expense, the deferral of payment of
management fees and from increased revenues attributable to increased subscriber
counts and a December 15, 1995 rate increase.

Cash used in investing activities decreased $578,000 to $2.2 million for the
six months ended June 30, 1996, compared to the corresponding period of 1995.
The decrease results primarily from decreased capital expenditures related to
improvements to the cable television system and decreases in the purchase of
addressable converters.

Cash used in financing activities totaled $11.9 million for the six months
ended June 30, 1996 resulting from the repayment of current debt and previously
outstanding debts and payments of deferred debt issuance costs in excess of the
initial draw on the Bank Credit Agreement.

Prime's primary need for capital has been to finance plant extensions,
rebuilds and upgrades and to add addressable converters to certain cable
systems. Prime spent $2.2 million during the first six months of 1996 on capital
expenditures and currently intends to spend approximately $4.6 million in 1996
for capital expenditures, including $820,000 to extend its plant to new service
areas.

The bank credit agreement was consummated in March, 1996. Prime has up to
$125 million available under the commitment in the new loan agreement, with
available borrowing levels based on debt to operating cash flow ratios as
specified in the loan agreement. Based on Prime's operating cash flow for the
quarter ending June 30, 1996, Prime could have borrowed up to approximately
$112.3 million without being in default at June 30, 1996. Borrowings bear
interest at the bank's prime rate plus 2%.

F-49
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Alaskan Cable Network

We have audited the accompanying combined balance sheets of the Alaskan
Cable Network (see Note 1) as of December 31, 1995 and 1994, and the related
combined statements of income, shareholder's equity and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Alaskan Cable
Network at December 31, 1995 and 1994, and the combined results of its
operations, and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Woodland Hills, California

February 9, 1996 except for
Note 13, as to which the date is
March 14, 1996

F-50
<PAGE>
ALASKAN CABLE NETWORK

COMBINED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
(UNAUDITED) DECEMBER 31,
JUNE 30, --------------------
1996 1995 1994
------------ --------- ---------
(IN THOUSANDS)

<S> <C> <C> <C>
Cash and cash equivalents................................................... $ 1,015 $ 3,905 $ 6,153
Trade accounts receivable, less allowance for doubtful accounts of $102 in
1996, $95 in 1995 and $82 in 1994......................................... 1,402 1,537 1,366
Property, plant and equipment, net.......................................... 10,909 12,144 14,161
Intangible assets, net...................................................... 5,244 6,908 10,027
Due from affiliates......................................................... 639 -- 1,673
------------ --------- ---------
Total Assets................................................................ $ 19,209 $ 24,494 $ 33,380
------------ --------- ---------
------------ --------- ---------

LIABILITIES AND SHAREHOLDER'S EQUITY

Line of credit.............................................................. $ 3,000 $ 8,000 $ --
Accounts payable............................................................ 305 615 390
Accrued compensation and benefits........................................... 425 331 381
Other accrued liabilities................................................... 885 775 1,445
Deferred revenue............................................................ 1,152 1,211 1,128
Due to affiliates........................................................... -- 64 --
------------ --------- ---------
Total liabilities........................................................... 5,767 10,996 3,344
------------ --------- ---------

Commitments and contingencies

Shareholder's equity:
Common Stock.............................................................. 3 3 3
Additional paid-in-capital................................................ 14,458 14,478 31,936
Accumulated deficit....................................................... (1,019) (983) (1,903)
------------ --------- ---------
Total shareholder's equity.................................................. 13,442 13,498 30,036
------------ --------- ---------
Total liabilities and shareholder's equity.................................. $ 19,209 $ 24,494 $ 33,380
------------ --------- ---------
------------ --------- ---------
</TABLE>

See accompanying notes.

F-51
<PAGE>
ALASKAN CABLE NETWORK

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEARS ENDED,
JUNE 30, DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cable television service revenue.......................... $ 7,442 $ 7,224 $ 14,515 $ 13,883 $ 14,142
Operating expenses:
Cost of revenues........................................ 2,485 2,374 4,702 4,467 4,350
Selling, general and administrative..................... 1,515 1,450 3,005 2,808 3,063
Depreciation and amortization........................... 3,113 3,034 6,176 6,092 6,362
--------- --------- --------- --------- ---------
Income from operations.................................... 329 366 632 516 367
Other income (expense):
Loss on disposal of assets.............................. (6) (2) -- -- (2,687)
Interest income, net.................................... (374) 55 80 235 46
--------- --------- --------- --------- ---------
Income (loss) before income taxes and cumulative effect of
change in accounting principle.......................... (51) 419 712 751 (2,274)
Benefit (provision) for income taxes...................... 15 16 208 (9) 622
--------- --------- --------- --------- ---------
Income (loss) before cumulative effect of change in
accounting principle.................................... (36) 435 920 742 (1,652)
Cumulative effect of change in accounting principle....... -- -- -- -- (622)
--------- --------- --------- --------- ---------
Net income (loss)......................................... $ (36) $ 435 $ 920 $ 742 $ (2,274)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

See accompanying notes.

F-52
<PAGE>
ALASKAN CABLE NETWORK

COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Balance at December 31, 1992.................................. $ 3 $ 32,161 $ (371) $ 31,793
Dividends paid................................................ -- (112) -- (112)
Net income, year ended December 31, 1993...................... -- -- (2,274) (2,274)
----- ---------- ------------- ----------
Balance at December 31, 1993.................................. 3 32,049 (2,645) 29,407
Decrease in paid-in-capital................................... -- (113) -- (113)
Net income, year ended December 31, 1994...................... -- -- 742 742
----- ---------- ------------- ----------
Balance at December 31, 1994.................................. 3 31,936 (1,903) 30,036
Dividend to JKCI.............................................. -- (18,195) -- (18,195)
Net income.................................................... -- -- 920 920
Capital Contribution by JKCI.................................. -- 737 -- 737
----- ---------- ------------- ----------
Balance at December 31, 1995.................................. 3 14,478 (983) 13,498
Net loss (unaudited).......................................... -- -- (36) (36)
Decrease in additional paid-in capital (unaudited)............ -- (20) -- (20)
----- ---------- ------------- ----------
Balance at June 30, 1996 (unaudited).......................... $ 3 $ 14,458 $ (1,019) $ 13,442
----- ---------- ------------- ----------
----- ---------- ------------- ----------
</TABLE>

See accompanying notes.

F-53
<PAGE>
ALASKAN CABLE NETWORK

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................... $ (36) $ 435 $ 920 $ 742 $ (2,274)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Provision (credit) for uncollectible
accounts receivable..................... 7 14 13 (13) 55
Loss on disposal of assets................ 6 2 20 39 2,687
Depreciation and amortization............. 3,113 3,034 6,176 6,092 6,362
Changes in operating assets and
liabilities:
Trade accounts receivable............... 128 13 (184) (11) 160
Intangible and other assets............. (4) 155 (146) (206) 3
Accounts payable........................ (310) (86) 225 (219) (44)
Accrued compensation and benefits and
other accrued
liabilities........................... 204 61 17 (156) 414
Deferred revenue........................ (59) 15 83 11 (36)
--------- --------- --------- --------- ---------
Net cash provided by operating activities... 3,049 3,643 7,124 6,279 7,327
INVESTING ACTIVITIES
Additions to property, plant and
equipment................................. (216) (275) (914) (1,170) (6,005)
--------- --------- --------- --------- ---------
Net cash used in investing activities....... (216) (275) (914) (1,170) (6,005)
FINANCING ACTIVITIES
Borrowings on line of credit................ 6,000 -- 8,000 -- --
Repayment of line of credit................. (11,000) -- -- -- --
Change in due from affiliates............... (703) 1,628 1,737 (1,673) --
Decrease in paid-in-capital................. (20) -- -- (113) --
Dividends paid to Jack Kent Cooke
Incorporated.............................. -- (9,700) (18,195) -- (112)
--------- --------- --------- --------- ---------
Net cash used in financing activities....... (5,723) (8,072) (8,458) (1,786) (112)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents............................... (2,890) (4,704) (2,248) 3,323 1,210
Cash and cash equivalents at beginning of
period.................................... 3,905 6,153 6,153 2,830 1,620
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of
period.................................... $ 1,015 $ 1,449 $ 3,905 $ 6,153 $ 2,830
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest................................ $ -- $ -- $ -- $ -- $ --
Income taxes............................ $ -- $ -- $ 3 $ 45 $ --
Supplemental disclosure of noncash financing
activities:
In 1995, JKCI forgave $737 of liabilities
owed by the Company
</TABLE>

See accompanying notes.

F-54
<PAGE>
ALASKAN CABLE NETWORK

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 1995

1. ORGANIZATION AND BASIS OF PRESENTATION

The combined financial statements of the Alaskan Cable Network (ACN or the
Company) include the operations of cable television systems of Alaskan Cable
Network/Fairbanks, Inc., Alaskan Cable Network/Juneau, Inc. and Alaskan Cable
Network/Ketchikan, Sitka, Inc. for the years ended December 31, 1995, 1994 and
1993. Each of the entities comprising ACN is wholly owned by Jack Kent Cooke
Incorporated (JKCI). Prior to April 30, 1992, these companies were wholly owned
subsidiaries of Cooke Media Group Inc. (CMG), a wholly owned subsidiary of JKCI.
In connection with an agreement with an unrelated party for the sale of CMG and
certain other JKCI operations, the cable television systems comprising ACN were
transferred to JKCI. This transaction was accounted for as a transfer among
companies under common control, and therefore, was recorded at CMG's historical
cost basis.

Cable television operations generate revenue through the use of property and
equipment and, therefore, have few current assets, as the expression is defined
in terms of a one-year operating cycle. Accordingly, the Company does not
identify current assets and current liabilities separately in the accompanying
combined balance sheets.

The Company's operations are regulated by the Federal Communications
Commission and certain other state and local authorities.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) 109, "Accounting for Income Taxes". The
Company adopted the provisions of the new standard in its financial statements
on January 1, 1993. The cumulative effect as of January 1, 1993, due to the
adoption of SFAS No. 109, was an expense for income taxes of $622,000 for the
year ended December 31, 1993.

Under SFAS 109, the liability method is used in accounting for income taxes.
Under this method, deferred income taxes are recognized for the tax consequences
of "temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts,
and the tax bases of existing assets and liabilities. Under SFAS No. 109, the
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date. Prior to the adoption of SFAS No. 109,
income tax expense was determined using the deferred method. Under the deferred
method, deferred taxes were recognized using the tax rate applicable to the year
of calculation and were not adjusted for subsequent changes in tax rates.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

The Company considers all highly liquid investments with initial maturities
of three months or less when acquired as cash equivalents.

CONCENTRATION OF CREDIT RISK

The Company derives its revenues from thousands of customers located
principally in four cities in Alaska. None of the individual customer accounts
receivable balances are material. Customers are billed monthly, 15 days in
advance of the beginning of the service period. Invoices are generally due at
the

F-55
<PAGE>
ALASKAN CABLE NETWORK

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
beginning of the service period. The Company generally does not require
collateral and losses on uncollectible receivables have been within management's
expectations.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is recorded at cost. Depreciation and
amortization is provided on the straight-line method over the estimated useful
lives, which are generally as follows:

<TABLE>
<S> <C>
Buildings and improvements.......................... 19 to 40 years
Cable television systems............................ 8 to 10 years
Machinery and equipment............................. 8 to 10 years
</TABLE>

INTANGIBLE AND OTHER ASSETS

Intangible assets are recorded at cost and are amortized using the
straight-line method over their estimated useful lives, principally 7 to 12
years. The cost in excess of fair value of net assets of purchased businesses is
amortized using the straight-line method over forty years. The carrying value of
the cost in excess of fair value of net assets of purchased businesses is
reviewed if the facts and circumstances suggest that it may be impaired. If this
review indicates the cost in excess of fair value of the net assets of purchased
businesses will not be recoverable, as determined based on the undiscounted cash
flows of the entity acquired over the remaining amortization period, the
Company's carrying value of this asset is reduced by the estimated shortfalls of
cash flows.

REVENUE RECOGNITION

Revenues are generally billed in advance and are deferred until cable
service is provided.

ESTIMATES USED IN THE PREPARATION OF THE COMBINED FINANCIAL STATEMENTS

The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results inevitably will differ from those estimates
and such differences may be material to the financial statements.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.

F-56
<PAGE>
ALASKAN CABLE NETWORK

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Land................................................................ $ 20 $ 20
Buildings and improvements.......................................... 294 270
Cable television systems............................................ 27,354 26,743
Machinery and equipment............................................. 1,399 1,399
Construction in progress............................................ 637 441
----------- -----------
29,704 28,873
Less accumulated depreciation....................................... (17,560) (14,712)
----------- -----------
$ 12,144 $ 14,161
----------- -----------
----------- -----------
</TABLE>

The Company recorded depreciation expense of $2,911,000, $2,871,000 and
$3,040,000 in 1995, 1994 and 1993, respectively.

4. INTANGIBLE AND OTHER ASSETS

Intangible and other assets consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Subscriber lists..................................................... $ 26,666 $ 26,666
Franchise rights..................................................... 5,609 5,609
Cost in excess of fair value of purchased businesses (goodwill)...... 2,209 2,209
Other assets......................................................... 1,334 1,188
---------- ----------
35,818 35,672
Less accumulated amortization........................................ (28,910) (25,645)
---------- ----------
$ 6,908 $ 10,027
---------- ----------
---------- ----------
</TABLE>

5. LINE OF CREDIT

On June 27, 1995, the Company entered into a $30 million line of credit
agreement with a bank. Borrowings under the line of credit are collateralized by
all of the Company's common stock and bear interest, at the Company's option, at
the prime rate or the interbank offered rate plus 1% (7.5% at December 31,
1995). If the aggregated borrowings exceed $25 million, the interest rate, at
the Company's option, on the amount in excess of $25 million is based on the
prime rate plus .75% or the interbank offered rate plus 2%. The line of credit
agreement expires on June 30, 1997. There were $8 million in borrowings
outstanding under this agreement at December 31, 1995.

F-57
<PAGE>
ALASKAN CABLE NETWORK

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

5. LINE OF CREDIT (CONTINUED)
The line of credit agreement places certain restrictions on the Company,
including limitations on liens, disposition of assets, loans, investments,
capital expenditures, and requires compliance with certain financial covenants.

6. INCOME TAXES

The Company utilizes the liability method to account for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

Temporary differences arise primarily from differences in depreciation and
amortization for financial statement and income tax purposes, and unused net
operating loss carryforwards.

Significant components of the Company's deferred tax liabilities and assets
are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization......................................... $ -- $ 377
Deferred tax assets:
Net operating loss carryforwards...................................... 2,085 2,679
Depreciation and amortization......................................... 434 --
Accrued sick leave pay................................................ 49 48
Accrued vacation pay.................................................. 39 37
Allowance for loss on receivables..................................... 35 35
Tax credit carryforward............................................... 19 19
--------- ---------
Total deferred tax assets............................................. 2,661 2,818
Valuation allowance for deferred tax assets........................... (2,661) (2,441)
--------- ---------
Net deferred tax assets................................................. -- 377
--------- ---------
Net deferred taxes...................................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>

Management has determined, based on the Company's historical operating
results, the potential impact of deregulation in the cable television industry,
and the ability of other JKCI entities to utilize the Company's net operating
loss carryforwards, that it is more likely than not that the deferred tax asset
will not be realized prior to expiration. The Company will continue to assess
the need for a valuation allowance based on future operating results and facts
and circumstances at the time.

F-58
<PAGE>
ALASKAN CABLE NETWORK

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

6. INCOME TAXES (CONTINUED)
The reconciliation of income tax computed at the U.S. federal statutory tax
rate to the provision (benefit) for income taxes for the years ended December 31
is as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
U.S. federal income tax rate......................... 34.0% 34.0% (34.0)%
State income tax refunds, net of federal tax
benefit............................................ (29.0) -- --
Benefit of alternative minimum tax loss
carryforwards...................................... -- (36.0) --
Benefit of net operating loss carryforwards.......... (72.0) -- --
Forgiveness of debt income........................... 35.0 -- --
Amortization of cost in excess of fair value of net
assets of purchased businesses..................... 3.0 3.0 1.0
Alternative minimum tax.............................. -- (1.0) --
Reduction of taxes provided in prior years........... -- (1.0) --
Net operating losses not providing current tax
benefit............................................ -- -- 6.0
Other--net........................................... -- 2.0 --
----- ----- -----
(29.0)% 1.0% (27.0)%
----- ----- -----
----- ----- -----
</TABLE>

At December 31, 1995, the company has unused net operating loss
carryforwards for federal and state income tax purposes of approximately $4.5
million and $5.9 million, respectively. The federal and state net operating loss
carryforwards expire in years 2006 through 2009.

A consolidated federal tax return is filed by JKCI. The Company has a tax
sharing arrangement with JKCI requiring that the Company provide for income
taxes as if it were a separate taxable entity. Under the arrangement, the
Company will receive benefit for its operating losses only in years when it has
taxable income. Such benefit will be reduced to the extent that the Company's
operating losses have been utilized by affiliated companies in the consolidated
tax return. Management believes the recorded provision (benefit) for income
taxes is not materially different than the amounts that would be recorded if the
Company were a stand-alone entity.

7. RETIREMENT PLANS

An affiliate of the Company sponsors a 401(k) savings plan (the Plan) which
covers most non-union full-time employees of the Company, who may elect to
contribute from 2% to 16% of their compensation to the Plan. The Company
recognized expenses for matching contributions in the amount of $24,000, $16,000
and $18,000 in 1995, 1994 and 1993, respectively.

The company contributes to a union-sponsored defined benefit pension plan.
Such contribution expense totaled $130,000, $123,000 and $135,000 for the years
ended December 31, 1995, 1994 and 1993, respectively.

F-59
<PAGE>
ALASKAN CABLE NETWORK

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

8. SHAREHOLDER'S EQUITY

Common Stock consists of the following:

<TABLE>
<S> <C>
$1.00 par value, shares authorized, issued and outstanding:
Alaskan Cable Network, Inc.................................. 200 shares
Alaskan Cable Network/Fairbanks, Inc........................ 1,000 shares
Alaskan Cable Network/Juneau Holdings, Inc.................. 200 shares
Alaskan Cable Network/Ketchikan-Sitka, Inc.................. 1,000 shares
Alaskan Cable Network/Juneau, Inc........................... 540.5 shares
</TABLE>

The accumulated deficit reflects the Company's operating results subsequent
to the sale of the cable television systems to JKCI discussed in Note 1.

9. ADVERTISING COSTS

The Company expenses all advertising costs as incurred. Advertising costs
were $113,000, $98,000 and $131,000 for the years ended December 31, 1995, 1994
and 1993, respectively, and were recorded as part of selling, general and
administrative expenses.

10. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases certain facilities and equipment primarily under
operating leases which expire on various dates through 2001. Future minimum
rental payments as of December 31, 1995 under noncancellable operating leases
are as follows (in thousands):

<TABLE>
<S> <C>
1996......................................................... $ 127
1997......................................................... 99
1998......................................................... 71
1999......................................................... 64
2000......................................................... 21
Thereafter................................................... 9
---------
$ 391
---------
---------
</TABLE>

Rent expense was $433,000, $391,000 and $373,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.

F-60
<PAGE>
ALASKAN CABLE NETWORK

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CABLE SERVICE RATE REREGULATION

On April 1, 1993 the Federal Communications Commission ("FCC") adopted rules
governing rates charged by cable operators for the basic service tier of
channels, the installation, lease and maintenance of equipment (such as
converter boxes and remote control units) used by subscribers to receive this
tier, and for cable programming services other than programming offered on a
per-channel or per-program basis (the "regulated services"). To comply with the
regulations, the Company implemented various subscriber service and rate changes
effective September 1, 1993. These changes resulted in a reduction of total
monthly revenue of approximately 10.5%.

On March 30, 1994, the FCC released revisions to its April 1, 1993 rate
regulations. The revisions required cable operators to implement additional rate
rollbacks using complex benchmark calculations, or alternatively, to justify
higher rates based on a cost-of-service showing. The Company elected to file
cost-of-service showings with the FCC where required. Management of the Company
believes that rates in effect at March 1994 were supportable under the
cost-of-service rules, and therefore, no rate rollbacks were implemented in
connection with the 1994 FCC revisions. Subsequent rate adjustments have been
made utilizing cost-of-service methodology with adjustments as provided by FCC
rules.

The regulated service rates charged by the Company may be reviewed by the
State of Alaska under certain conditions (for basic service) or the FCC (for
cable programming service). Refund liability for basic service rates is limited
to a one-year period. In order for the State of Alaska to exercise rate
regulation authority over the Company's basic service rates, 25% of each
systems' subscribers must request such regulation by filing a petition with the
State of Alaska. In July 1990, the Alaskan Public Utilities Commission
instituted rate regulation over the Juneau operations for their basic cable
service and installation. At December 31, 1995, the State of Alaska does not
have rate regulation authority over the other three locations comprising the
Alaskan Cable Network over their basic service rates, and therefore there is no
refund liability for basic service at this time. Furthermore, since the rate
regulation at the Juneau facility began in 1990, no refund liability exists for
this location as of December 31, 1995. Refund liability for cable programming
service rates may be calculated from the date a complaint alleging an
unreasonable rate for cable programming service is filed with the FCC until the
rate reduction is implemented. There have been no complaints filed with the FCC
for these certain franchise areas.

Management of the Company believes that it has complied in all material
respects with the provisions of the FCC rules and regulations and that the
Company is, therefore, not liable for any refunds. Accordingly, no provision has
been made in the financial statements for any potential refunds. The FCC rules
and regulations are, however, subject to judgmental interpretations, and the
impact of potential rate changes or refunds ordered by the FCC could cause the
Company to make refunds.

F-61
<PAGE>
ALASKAN CABLE NETWORK

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, based in part on
the opinion of the Company's legal counsel, the amount of ultimate liability
with respect to these actions will not materially affect the financial position,
results of operations, or cash flows of the Company.

11. RELATED PARTY TRANSACTION

The Company makes advances to/borrows from an affiliate at interest rates of
6.97% per annum during 1995, ranging from 3.91% to 5.49% per annum during 1994,
and ranging from 3.88% to 4.28% per annum during 1993. Net interest income
related to these advances was $7,000, $127,000 and $16,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. Such advances/borrowings are
payable on demand.

Certain executive officers of JKCI and Tower Media Inc., an affiliate of the
Company, perform services for the Company. No allocations to the Company were
made for such services performed by JKCI, as the amounts were immaterial, during
1995, 1994 and 1993. Management fees of $225,000, $233,000 and $202,000 for
1995, 1994 and 1993, respectively, were paid to Tower Media Inc. for accounting
and administrative services rendered on behalf of the Company. The Company
believes the management fees paid to Tower Media Inc. are at least as favorable
as the cost of similar services from unrelated third parties. JKCI administers a
health insurance plan for the Company's employees at JKCI's cost. The Company
then reimburses JKCI for the cost of the service provided.

12. FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS; The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.

LINE OF CREDIT; The carrying amounts of the Company's borrowings under
its line of credit agreement approximate their fair value as a result of the
variable interest rate that is adjusted monthly.

DUE FROM AFFILIATES; The carrying amount of the due from (to)
affiliates approximates its fair value as a result of being payable on
demand and the immateriality of the outstanding borrowings.

13. SUBSEQUENT EVENT

On March 14, 1996, the Company signed a letter of intent to sell all of its
assets to General Communication, Inc. The selling price is in excess of the net
book value of the Company's assets at December 31, 1995. The closing of the sale
is subject to the execution of a definitive Asset Purchase Agreement and may be
subject to regulatory approval.

F-62
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION FOR ALASKAN CABLE

Alaskan Cable management's discussion of the financial condition of Alaskan
Cable must be addressed in the context of regulatory changes in the form of the
1996 Telecom Act, the 1992 Cable Act, and the Communications Act discussed
elsewhere in this Prospectus.

THREE YEARS ENDED DECEMBER 31, 1995

RESULTS OF OPERATIONS. Revenues totaled $14.5 million, $13.9 million and
$14.1 million during the years ended December 31, 1995,1994 and 1993,
respectively. The 4.6% growth in 1995 as compared to 1994 resulted primarily
from increases in regulated service rates implemented January 1, 1995. The 1.8%
decrease in 1994 as compared to 1993 resulted primarily from the subscriber rate
reductions implemented September 1, 1993. Average monthly revenue per account
was approximately $48.00, $45.75 and $47.75 in 1995, 1994 and 1993,
respectively, representing an increase (decrease) of approximately 4.9% and
(4.2%) in 1995 and 1994, respectively. Revenues were primarily generated from
subscription fees, installation charges, and subscriber cable equipment rentals.

Direct operating expenses, representing costs directly attributable to
providing cable services to customers, increased 5.3% in 1995 as compared to
1994 and increased 2.7% in 1994 as compared to 1993. The increases result from
increased business activity resulting from the growth in the number of
subscribers and increased programming costs.

EBITDA as a percentage of revenues decreased from 47.6% to 46.9% during the
year ended December 31, 1995 compared to the corresponding period of 1994. The
decrease was primarily caused by an increase in cost of revenues and selling,
general and administrative expenses that on a percentage basis exceeded the
corresponding increase in revenues. EBITDA as a percentage of revenues increased
from 28.6% to 47.6% during the year ended December 31, 1994 compared to the
corresponding period of 1993. The increase was primarily caused by a loss on
disposal of assets in 1993 offset by a net decrease in cost of revenues,
selling, general and administrative expenses, depreciation and amortization
expenses that on a percentage basis exceeded the corresponding decrease in
revenues as affected by the approximate 10.5% rate reduction described above.

Depreciation and amortization expense was $6.2 million, $6.1 million and
$6.4 million for the years ended December 31, 1995, 1994 and 1993, respectively.
The 1995 increase as compared to 1994 results from continued cable television
build-out expenditures, and the amortization of line of credit deferred loan
expenses. The 1994 decrease as compared to 1993 results from disposal of old
cable television systems in 1993 whose original construction costs were higher
than the expenditures made to rebuild the system.

Income tax (provision) benefit totaled $208,000, ($9,000) and $622,000 in
1995, 1994 and 1993, respectively, resulting from the application of statutory
income tax rates to net earnings or loss before income taxes. Alaskan Cable
experienced income (loss) before income taxes and cumulative effect of change in
accounting principle of $712,000, $751,000 and ($2,274,000) for the years ended
December 31, 1995, 1994, and 1993, respectively.

In light of Alaskan Cable's history of losses prior to 1994, the potential
negative impact of recent deregulation in the cable television industry, and the
ability of other Jack Kent Cooke Incorporated entities to utilize Alaskan
Cable's net operating loss carryforwards, management established a valuation
allowance for $2.7 million as of December 31, 1995.

F-63
<PAGE>
Alaskan Cable adopted Statement of Financial Accounting Standards No. 109
("SFAS No. 109"), Accounting for Income Taxes on January 1, 1993. The cumulative
effect adjustment recorded in 1993 due to adoption of SFAS 109 totaled $622,000.

Certain of Alaskan Cable's expenses, such as those for wages and benefits,
equipment repair and replacement, and billing and marketing generally increase
with inflation.

LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operating activities
increased $800,000 to $7.1 million for the year ended December 31, 1995 compared
to the corresponding period of 1994 resulting primarily from increased net
income of $178,000 and $444,000 resulting from a $225,000 increase in accounts
payable in 1995 compared to a $219,000 decrease in 1994. Cash provided by
operating activities decreased $1.0 million to $6.3 million for the year ended
December 31, 1994 compared to the corresponding period of 1993. The decrease
resulted primarily from cash used for the acquisition of other assets and
payments of accrued liabilities.

Cash used in investing activities decreased $256,000 to $914,000 for the
year ended December 31, 1995 compared to the corresponding period of 1994. Cash
used in investing activities decreased $4.8 million to $1.2 million for the year
ended December 31, 1994 compared to the corresponding period of 1993. Both
decreases result primarily from reduced capital expenditures related to
purchases of property, plant and equipment.

Cash used in financing activities increased from $1.8 million to $8.5
million for the year ended December 31, 1995 compared to the corresponding
period of 1994 related primarily to the excess of dividends paid over borrowings
in 1995 as compared to 1994. Cash used in financing activities increased from
$112,000 to $1.8 million for the year ended December 31, 1994 compared to the
corresponding period of 1993 primarily due to increased loans to affiliates.

Alaskan Cable's primary need for capital has been to finance plant
extensions, rebuilds and upgrades and to add addressable converters to certain
cable systems. Alaskan Cable spent $914,000 during 1995 on capital expenditures,
and currently intends to spend approximately $400,000 in 1996 for capital
expenditures, including $70,000 to extend its plant to new service areas.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

As of June 30, 1996, Alaskan Cable's systems passed more than 42,720 homes
and served more than 25,426 residential subscribers. Alaskan Cable had
approximately 20,310 subscriptions to premium service units.

RESULTS OF OPERATIONS. Revenues totaled $7.4 million and $7.2 million
during the six-month periods ended June 30, 1996 and 1995, respectively. The
revenue growth in 1996 as compared to 1995 resulted primarily from rate
increases for services. Average monthly revenue per account for the six months
ended June 30, 1996 and 1995, was approximately $48.83 and $46.17, respectively,
representing increases of 5.8%. Revenues were primarily generated from
subscription fees, installation charges, and subscriber cable equipment rentals.

Direct operating expenses, representing costs directly attributable to
providing cable services to customers, increased 4.7% for the six-month period
ended June 30, 1996 compared to the corresponding period of 1995. 1996 increases
resulted from increased business activity from increased services and increased
programming costs. Selling, general and administrative operating expenses
increased 4.5% for the six-month period ended June 30, 1996 compared to the
corresponding period of 1995. 1996 increases resulted from increased business
activity from increased services.

Depreciation and amortization expense totaled $3.1 million and $3.0 million
for the six-month periods ended June 30, 1996 and 1995, respectively. The 1996
increases as compared to 1995 is

F-64
<PAGE>
primarily the result of the amortization of deferred loan expenses pertaining to
the line of credit reflected in the first six months of 1996.

LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operating activities
decreased $594,000 to $304,900 for the six-month period ended June 30, 1996
compared to the corresponding period of 1995 resulting from decreased net income
of $471,000 and a net use of cash resulting from changes in operating assets and
liabilities in 1996 as compared to 1995.

Cash used in investing activities decreased from $275,000 to $216,000 for
the six-month period ended June 30, 1996 compared to the corresponding period of
1995 resulting from reduced capital expenditures for property, plant and
equipment in 1996 as compared to 1995.

Cash used in financing activities decreased from $8.1 million to $5.7
million for the six-month period ended June 30, 1996 compared to the
corresponding period of 1995. For 1996, increases in cash from line of credit
borrowings in 1996 totaling $6.0 million were offset by repayments of line of
credit borrowings totaling $11.0 million. For 1995, dividends paid of $9.7
million were offset by reduced loan repayments from affiliates of $2.3 million.

Alaskan Cable's primary need for capital has been to finance plant
extensions, rebuilds and upgrades and to add addressable converters to certain
cable systems. Alaskan Cable currently intends to spend approximately $400,000
in 1996 for capital expenditures, including $70,000 to extend its plant to new
service areas.

EBITDA as a percentage of revenues decreased from 47.1% to 46.2% during the
six-month period ended June 30, 1996 compared to the corresponding period of
1995. The 1996 decrease was primarily caused by increases in cost of revenues
and selling, general and administrative expenses that on a percentage basis
exceeded the corresponding increase in revenues.

Income tax benefit totaled $15,000 for the six-month period ended June 30,
1996. Income tax benefit totaled $16,000 for the six-month periods ended June
30, 1995. The 1996 benefit resulted from the reversal of the tax provision
reported in the December 31, 1995 financial statements. This amount was reversed
due to the application of net operating loss carryforwards applied in 1995. The
1995 benefit resulted from the application of net operating loss carryforwards.

Certain of Alaskan Cable's expenses, such as those for wages and benefits,
equipment repair and replacement, and billing and marketing generally increase
with inflation.

F-65
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To The Stockholders
Alaska Cablevision, Inc.
Kirkland, Washington

We have audited the accompanying balance sheets of Alaska Cablevision, Inc. as
of December 31, 1995 and 1994, and the related statements of income,
stockholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alaska Cablevision, Inc. at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.

/s/ CARL & CARLSEN

February 27, 1996
Seattle, Washington

F-66
<PAGE>
ALASKA CABLEVISION, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
(UNAUDITED) DECEMBER 31,
JUNE 30, ------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Cash............................................................ $ 614,411 $ 525,734 $ 118,856
Subscriber receivables.......................................... 100,157 113,651 102,740
Advances to affiliates.......................................... 70,650 5,846 1,475
Other receivables............................................... 3,443 8,406 127,381
Prepaid assets.................................................. 49,984 34,196 24,510
Property, plant and equipment, less accumulated depreciation of
$8,296,801 (1996), $8,635,146 (1995) and $8,464,628 (1994).... 2,496,739 2,493,956 2,138,843
Excess of cost over fair value of net tangible assets of systems
purchased, less amortization of $363,150 (1996), $401,602
(1995) and $388,785 (1994).................................... 111,110 123,927 149,562
-------------- -------------- --------------
$ 3,446,494 $ 3,305,716 $ 2,663,367
-------------- -------------- --------------
-------------- -------------- --------------

LIABILITIES AND STOCKHOLDERS' DEFICIT

Accounts payable................................................ $ 205,737 $ 99,458 125,801
Accrued interest................................................ 57,810 53,659 37,718
Accrued taxes and expenses...................................... 191,404 320,755 246,517
Deferred revenues............................................... 23,882 27,193 26,999
Loans payable to bank........................................... 3,695,079 3,695,079 3,421,629
Note payable to stockholder..................................... 300,000 300,000 300,000
Notes payable to former stockholders............................ 1,563,887 1,673,155 1,879,888
-------------- -------------- --------------
Total liabilities............................................. 6,037,799 6,169,299 6,038,552
-------------- -------------- --------------
Stockholders' Deficit
Common stock ($1.00 par value), including consideration paid
in excess of stated value. Authorized 20,000 shares; issued
and outstanding 10,000 at June 30, 1996 and December 31,
1995, and 1994. ............................................ 12,624 12,624 12,624
Treasury stock, 3,400 and 3,000 shares at June 30, 1996 and
December 31, 1995, respectively............................. (4,500,000) (4,500,000) (4,500,000)
Retained earnings............................................. 1,896,071 1,623,793 1,112,191
-------------- -------------- --------------
Total stockholders' deficit................................... (2,591,305) (2,863,583) (3,375,185)
-------------- -------------- --------------
Commitments and contingencies
$ 3,446,494 $ 3,305,716 $ 2,663,367
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See accompanying notes.

F-67
<PAGE>
ALASKA CABLEVISION, INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------------------- -------------------------------------------
1996 1995 1995 1994 1993
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues
Cable television fees............... $ 3,006,745 $ 2,969,030 $ 5,920,057 $ 5,708,842 $ 5,660,189
------------- ------------- ------------- ------------- -------------
Operating Expenses
Salaries and wages.................. 451,898 392,373 840,031 917,223 786,391
Payroll taxes and employee
benefits.......................... 102,658 97,656 216,597 210,962 181,521
Program fees........................ 491,789 475,923 950,778 908,770 821,037
Copyright fees...................... 20,818 22,845 40,345 38,874 28,515
Maintenance, parts and supplies..... 44,768 50,236 114,318 134,893 116,740
Bad debts........................... 23,115 12,461 45,201 33,376 32,320
Insurance........................... 18,320 16,589 34,175 27,258 29,867
Business and property taxes......... 15,876 24,479 25,481 24,511 8,567
Rentals............................. 84,921 72,126 144,292 135,674 129,521
Travel.............................. 8,026 23,433 54,505 82,790 42,161
Telephone and utilities............. 65,494 61,468 127,535 109,123 112,939
Vehicle expense..................... 22,002 18,915 44,322 40,433 40,858
Computer services................... 23,556 23,189 46,298 41,358 45,110
Postage and freight................. 21,701 22,055 47,543 42,259 46,551
Office expense...................... 28,480 27,463 58,200 56,611 49,013
Advertising and sales expense....... 34,679 21,948 66,262 63,306 56,276
Other operating expenses (net)...... 770 664 (2,906) 35,570 24,162
Depreciation and amortization....... 236,907 209,998 420,001 313,615 435,113
Corporate administration............ 239,413 246,295 483,801 276,190 291,454
Management fees (Note 6)............ 183,944 217,227 400,075 571,357 567,017
------------- ------------- ------------- ------------- -------------
2,119,135 2,037,343 4,156,851 4,064,153 3,845,133
------------- ------------- ------------- ------------- -------------
Operating income.................. 887,610 931,687 1,763,213 1,644,689 1,815,056
------------- ------------- ------------- ------------- -------------
Other Income (Expense)
Interest expense.................... (202,998) (269,923) (485,508) (418,301) (468,240)
Interest income..................... 3,372 22 -- 13,446 6,105
Income (loss) from disposition of
assets............................ -- -- 7,431 (47,532) (33,135)
Other (net)......................... (42,118) -- (79,475) -- (1,739)
------------- ------------- ------------- ------------- -------------
(241,744) (259,901) (507,552) (452,387) (491,009)
------------- ------------- ------------- ------------- -------------
Net income............................ $ 645,866 $ 661,786 $ 1,205,651 $ 1,192,302 $ 1,318,047
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income per common share........... $ 97.86 $ 94.54 $ 172.24 $ 170.33 $ 188.29
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>

See accompanying notes.

F-68
<PAGE>
ALASKA CABLEVISION, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON RETAINED
STOCK TREASURY STOCK EARNINGS
--------- -------------- -------------
<S> <C> <C> <C>
Balance, December 31, 1993............................................. 12,624 (4,500,000) 570,778
Net income, year ended December 31, 1994............................... -- -- 1,192,302
Distributions to stockholders.......................................... -- -- (650,889)
--------- -------------- -------------
Balance, December 31, 1994............................................. 12,624 (4,500,000) 1,112,191
Net income............................................................. -- -- 1,205,651
Distributions to stockholders.......................................... -- -- (694,049)
--------- -------------- -------------
Balance, December 31, 1995............................................. $ 12,624 $ (4,500,000) $ 1,623,793
Net income (unaudited)................................................. -- -- 645,866
Distributions to stockholders.......................................... -- -- (373,588)
--------- -------------- -------------
Balance, June 30, 1996 (unaudited)..................................... $ 12,624 $ (4,500,000) $ 1,896,071
--------- -------------- -------------
--------- -------------- -------------
</TABLE>

See accompanying notes.

F-69
<PAGE>
ALASKA CABLEVISION, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------------------- ----------------------------------------------
1996 1995 1995 1994 1993
------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net income............................... $ 645,866 $ 661,786 $ 1,205,651 $ 1,192,302 $ 1,318,047
Noncash items included in net income
Depreciation and amortization.......... 236,907 209,998 420,001 313,615 435,113
(Gain) loss from disposition of
assets............................... -- -- (7,431) 47,532 33,135
Net increase in advances to
affiliates........................... (64,804) (49,851) (4,371) 382,241 (267,771)
Net decrease in subscriber receivables,
other receivables and prepaid
assets............................... 2,669 105,827 98,378 (16,093) (13,965)
Net increase (decrease) in payables,
accrued expenses and deferred
revenues............................. (18,921) 36,452 64,030 56,365 (9,390)
------------ -------------- -------------- -------------- --------------
Net cash provided by operating
activities......................... 801,717 964,212 1,776,258 1,975,962 1,495,169
------------ -------------- -------------- -------------- --------------
Cash Flows From Investing Activities
Additions to property, plant and
equipment.............................. (226,872) (441,255) (757,062) (1,118,183) (337,164)
Proceeds from sale of assets............. -- -- 15,014 9,038 2,795
------------ -------------- -------------- -------------- --------------
Net cash used by investing
activities......................... (226,872) (441,255) (742,048) (1,109,145) (334,369)
------------ -------------- -------------- -------------- --------------
Cash Flows From Financing Activities
Proceeds from senior debt borrowings..... -- 3,695,079 3,695,079 -- --
Increase (decrease) in loans due to
affiliate.............................. -- (3,421,629) (3,421,629) 46,102 (256,923)
Repayment on notes due to former
stockholders........................... (109,269) (101,446) (206,733) (191,928) (178,184)
Repayment on other borrowings............ (3,311) (1,447) -- -- (1,932)
Distributions to stockholders............ (373,588) (348,027) (694,049) (650,889) (736,100)
------------ -------------- -------------- -------------- --------------
Net cash used by financing
activities......................... (486,168) (177,470) (627,332) (796,715) (1,173,139)
------------ -------------- -------------- -------------- --------------
Net increase in cash....................... 88,677 345,487 406,878 70,102 (12,339)
Cash Balance
Beginning of period...................... 525,734 118,856 118,856 48,754 61,093
------------ -------------- -------------- -------------- --------------
End of period............................ $ 614,411 $ 464,343 $ 525,734 $ 118,856 $ 48,754
------------ -------------- -------------- -------------- --------------
------------ -------------- -------------- -------------- --------------
Supplemental Information
Interest paid............................ $ 248,700 $ 288,544 $ 469,567 $ 421,793 $ 471,541
------------ -------------- -------------- -------------- --------------
------------ -------------- -------------- -------------- --------------
</TABLE>

See accompanying notes.

F-70
<PAGE>
ALASKA CABLEVISION, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) AFFILIATION--The Company is affiliated with Rock Associates, Inc.
through common ownership and management.

(b) FINANCIAL STATEMENT PRESENTATION--The accompanying balance sheet is
presented in an unclassified format as allowed in the Statement of Position on
Accounting by Cable Television Companies issued by the American Institute of
Certified Public Accountants. Revenues of cable television systems are derived
through use of plant and equipment and have few assets that can be defined in
terms of a one-year operating cycle. Management believes this format is the most
meaningful presentation of its financial position.

(c) OPERATIONS--The Company is engaged in providing cable television to
various communities located in the State of Alaska.

(d) REVENUE RECOGNITION--Revenues billed in advance for cable services are
deferred and recorded as income in the month in which the services are rendered.

(e) INCOME TAXES--The Company, with the consent of its shareholders, has
elected to have its income reported directly by the shareholders under
provisions of Sub-chapter S of the Internal Revenue Code.

(f) PLANT AND EQUIPMENT--Depreciation is computed substantially on the
straight-line basis for financial statement purposes over the estimated useful
lives of the assets:

<TABLE>
<S> <C>
Cable distribution systems........................ 7 - 10 years
Headend and satellite receiving equipment......... 7 - 10 years
Buildings......................................... 10 - 31 years
Transportation equipment.......................... 3 - 7 years
Other equipment and fixtures...................... 5 - 10 years

Maintenance and repairs are charged to expense as incurred.
</TABLE>

(g) INTANGIBLE ASSETS--The excess cost over fair value of net tangible
assets of systems acquired is primarily assignable as cost of franchise rights,
and is being amortized on a straight-line method over their respective expected
useful lives, but none in excess of twenty years. The carrying value of the cost
in excess of fair value of net assets of purchased business is reviewed if the
facts and circumstances suggest that it may be impaired. If this review
indicates the cost in excess of fair value of the net assets of purchased
businesses will not be recoverable, as determined based on the undiscounted cash
flows of the entity acquired over the remaining amortization period, the
Company's carrying value of this asset is reduced by the estimated shortfalls of
cash flows.

(h) EMPLOYEE BENEFITS PLAN--The Company has adopted a profit sharing and
employee savings plan under Section 401(K) of the Internal Revenue Code. This
plan allows eligible employees to defer up to 15% of their compensation on a
pre-tax basis through contributions to the savings plan. The Company contributed
$.50 in 1995, 1994 and 1993 for every dollar the employees contributed up to 5%
of compensation, which amounted to $14,117, $10,253 and $11,848 respectively.

(i) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the

F-71
<PAGE>
ALASKA CABLEVISION, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

NOTE 2--PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost, and categorized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Buildings, including leasehold improvements.................. $ 194,578 $ 157,778
Cable distribution systems, including connect drops and
converters................................................. 7,188,764 6,900,036
Headend and satellite equipment.............................. 2,734,119 2,649,779
Transportation equipment..................................... 346,507 322,047
Other equipment and fixtures................................. 494,616 406,010
-------------- --------------
$ 10,958,584 $ 10,435,650
-------------- --------------
-------------- --------------
</TABLE>

NOTE 3--LOANS PAYABLE TO BANK

Rock Associates, Inc. owed Provident National Bank and The Bank of
California, N.A. the combined amount of $36,260,000 as of December 31, 1994.
These combined borrowings, covered by a Term Loan Agreement, were collateralized
principally by the capital stock and assets of Rock Associates, Inc. and its
affiliates (see Note 1). Rock Associates, Inc. in turn loaned the Company
portions of the bank borrowings. Note payable to stockholder was also
subordinated in favor of Rock Associates, Inc.'s liability to the banks. This
debt was paid in full on February 28, 1995.

At December 31, 1995, loans payable to bank were covered by a Senior
Reducing Revolving Credit Loan Agreement between Rock Associates, Inc. and
Alaska Cablevision, Inc., co-borrowers, and PNC Bank, National Association.
Proceeds of the new loan agreement dated February 28, 1995, were used primarily
to refinance existing senior debt and to provide funds for cable plant
expansion.

Subject to various terms and conditions, including minimum required
quarterly annualized cash flow ratios to aggregate bank debt, the bank will lend
up to $6,400,000 on a revolving loan basis until December 31, 1997. Interest is
payable quarterly at either of two floating rates of interest. The first rate
will be the higher of the bank's prime rate or the Federal Funds rate plus 1/2%.
The second rate will be LIBOR rate plus 1 1/2%. The balance of loans payable to
bank is due at maturity, which is December 31, 1997.

Borrowings under the loan agreement are collateralized principally by the
capital stock and assets of the co-borrowers. Note payable to stockholder is
subordinated in favor of the Company's liability to the bank.

NOTE 4--NOTES PAYABLE TO FORMER STOCKHOLDERS

The notes due to former shareholders of Alaska Cablevision, Inc. originally
totaling $1,650,000 call for quarterly installments of $73,625 including
interest at 7 1/2% per annum. These notes are due in full on

F-72
<PAGE>
ALASKA CABLEVISION, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--NOTES PAYABLE TO FORMER STOCKHOLDERS (CONTINUED)
January 1, 1997. Notes totaling $600,000 are due August 30, 1996, repayable in
quarterly installments of interest only at 9% per annum. All notes are
subordinated to senior bank debt.

NOTE 5--NOTE PAYABLE TO STOCKHOLDER

The note due to stockholder is a demand note with interest payable quarterly
at a rate equal to the weighted average rate paid by Alaska Cablevision, Inc. on
its senior bank debt. The note is subordinated to senior bank debt.

NOTE 6--RELATED PARTY TRANSACTION

As described in Note 1, Rock Associates, Inc. provides significant services
to the Company. By agreement, the charge for overall management services is
presently based on a percentage of the Company's operating revenues. The
management fee percentage was 6%-10%, 10% and 10% for the year ended December
31, 1995, 1994 and 1993, respectively. In 1994 and 1993 Rock Associates, Inc.
also provided administration support to the Company. Corporate administration
charges are actual costs incurred. In 1995 all administration was performed by
the Company.

NOTE 7--FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. The fair value of the Company's
assets, which are primarily cash and accounts receivable, and the Company's
liabilities approximate their carrying value. The fair value of any off-balance
sheet commitments is immaterial.

NOTE 8--COMMITMENTS AND CONTINGENCIES

Minimum annual rental commitments at December 31, 1995 under operating
leases are approximately as follows:

<TABLE>
<S> <C>
Year Ended December 31:
1996................................................... $ 99,000
1997................................................... $ 73,000
1998................................................... $ 45,000
1999................................................... $ 42,000
2000................................................... $ 43,000
Thereafter............................................. $ 160,000
</TABLE>

NOTE 9--SUBSEQUENT EVENT

On March 14, 1996, the Company entered into a letter of intent to sell its
operating assets to General Communication, Inc. The total sales price is
$26,650,000, of which $16,650,000 is payable in cash at closing and $10,000,000
is payable in convertible subordinated debt. The sale is expected to close by
the end of 1996.

F-73
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION FOR ALASKA CABLEVISION

Alaska Cablevision management's discussion of the financial condition of
Alaska Cablevision must be addressed in the context of regulatory changes in the
form of the 1996 Telecom Act, the 1992 Cable Act, and the Communications Act
discussed elsewhere in this Prospectus.

THREE YEARS ENDED DECEMBER 31, 1995

RESULTS OF OPERATIONS. Revenues totaled $5.9 million, $5.7 million and $5.7
million during the years ended December 31, 1995, 1994 and 1993, respectively.
The 3.7% growth in 1995 as compared to 1994 resulted primarily from modest
incremental growth in the number of subscribers and increases in regulated
service rates. Approximately $171,000 of the growth in 1995 revenues was due to
increases in regulated service rates implemented November 1, 1994 and November
1, 1995. The 0.88% increase in 1994 as compared to 1993 resulted primarily from
additional revenues resulting from a 4.6% increase in the number of subscribers
offset by the subscriber rate reductions implemented in September 1993 and July
1994. Average monthly revenue per account was approximately $60.83, $61.17 and
$64.75 in 1995, 1994 and 1993, respectively, representing decreases of
approximately 0.6% and 5.5% in 1995 and 1994, respectively. Revenues were
primarily generated from subscription fees, installation charges, and subscriber
cable equipment rentals and advertising revenues.

Programming and copyright costs directly attributable to providing cable
services to customers increased 4.6% in 1995 as compared to 1994 and increased
11.5% in 1994 as compared to 1993. The increases result from increased business
activity from growth in the number of subscribers, increased program offerings
and increased programming rates.

Depreciation and amortization expense was $420,000, $314,000 and $435,000
for the years ended December 31, 1995, 1994 and 1993, respectively. The 1995
increase as compared to 1994 results from additional depreciation resulting from
increased capital expenditures in 1995 and 1994. The 1994 decrease as compared
to 1993 result from certain tangible and intangible assets becoming fully
amortized.

EBITDA as a percentage of revenues increased from 34.3% to 36.9% during the
year ended December 31, 1995 compared to the corresponding period of 1994. The
increase is primarily a result of a reduction in management fees charged by Rock
Associates, Inc. from $571,000 to $400,000. EBITDA as a percentage of revenues
decreased from 39% to 34.3% during the year ended December 31, 1994 compared to
the corresponding period of 1993. The decrease was primarily caused by an
increase in programming costs and operating expenses that on a percentage basis
exceeded the corresponding increase in revenues.

Certain of Alaska Cablevision's expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation.

LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operating activities
decreased approximately $200,000 to $1.8 million for the year ended December 31,
1995 compared to the corresponding period of 1994 resulting primarily from the
net effect of the following: (1) the decrease (receipt) of advances to
affiliates in 1994; (2) the decrease (receipt) of other receivables in 1995; and
(3) the increase in operating income in 1995. Cash provided by operating
activities increased $500,000 to $2.0 million for the year ended December 31,
1994 compared to the corresponding period of 1993. The increase resulted
primarily from the net effect of the following: (1) a decrease in advances to
affiliates in 1994 as compared

F-74
<PAGE>
to an increase in 1993; (2) an increase in accounts payable and accrued expenses
in 1994 compared to 1993; and (3) a decrease in operating income from 1993 to
1994.

Cash used in investing activities decreased $367,000 to $742,000 for the
year ended December 31, 1995 compared to the corresponding period of 1994. The
1995 decrease results primarily from reduced capital expenditures related to
purchases of property, plant and equipment. Cash used in investing activities
increased $775,000 to $1.1 million for the year ended December 31, 1994 compared
to the corresponding period of 1993. The 1994 increase results primarily from
increased capital expenditures related to purchases of property, plant and
equipment.

Cash used in financing activities decreased from $797,000 to $627,000 for
the year ended December 31, 1995 compared to the corresponding period of 1994.
The 1995 decrease resulted from $3.7 million of borrowings from Alaska
Cablevision's new senior revolving credit loan agreement which was used to
payoff $3.6 million in loans from affiliates and notes due to former
stockholders. Cash used in financing activities decreased from $1.2 million to
$797,000 for the year ended December 31, 1994 compared to the corresponding
period of 1993 related primarily to a net decrease in the pay-down of loans from
affiliates and reduced stockholder distributions.

Alaska Cablevision's primary need for capital has been to finance plant
rebuilds and upgrades, channel additions and service vehicles. Alaska
Cablevision spent $757,000 during 1995 on capital expenditures and currently
intends to spend approximately $525,000 in 1996 for capital expenditures,
including $75,000 to extend its plant to new service areas. The recorded cost of
assets disposed of totaled approximately $234,000, $583,000 and $501,000 in
1995, 1994 and 1993, respectively. 1995 disposals resulted from the replacement
of vehicles and upgraded plant and headend equipment. 1994 and 1993 disposals
resulted primarily from the write-off of converters and inside the home cable
wiring resulting from certain provisions of the 1992 Cable Act affecting the
pricing of converter rentals and ownership of inside the home cable wiring.

On February 28, 1995, Alaska Cablevision and Rock Associates, Inc., as
co-borrowers, entered into a new $6.4 million senior reducing revolving credit
loan agreement with a bank. Borrowings under the agreement are collateralized by
all of Alaska Cablevision's common stock and assets and bear interest, at Alaska
Cablevision's option, at (1) the higher of the bank's prime rate or the federal
funds rate plus 1/2%, or (2) the LIBOR rate plus 1-1/2%. The agreement expires
December 31, 1997.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

As of June 30, 1996, Alaska Cablevision's cable systems passed more than
11,000 homes and served more than 7,500 residential subscribers and over 1,500
business subscribers. Alaska Cablevision had approximately 7,650 residential
subscriptions to premium service units.

RESULTS OF OPERATIONS. Revenues totaled $3.0 million during each of the
six-month periods ended June 30, 1996 and 1995. Average monthly revenue per
account was approximately $62.00 and $61.17 during the six-month periods ended
June 30, 1996 and 1995, respectively, representing an increase of approximately
1.4%. Revenues were primarily generated from subscription fees, installation
charges, and subscriber cable equipment rentals and advertising revenues.

Programming and copyright costs increased 2.5% during the six-month period
ended June 30, 1996 compared to the corresponding period of 1995 due to
increased business activity from growth in the number of subscribers, increased
program offerings and increased programming rates.

Depreciation and amortization expense was approximately $237,000 and
$210,000 for the six-month periods ended June 30, 1996 and 1995, respectively.
The increase in the six-month period ended June 30, 1996 as compared to the same
period of 1995 results from additional depreciation resulting from capital
expenditures during 1996 and a full year of depreciation in 1996 on 1995 capital
expenditures as compared to a partial year of depreciation in 1995.

F-75
<PAGE>
EBITDA as a percentage of revenues decreased from 38.5% to 37.4% during the
six-month period ended June 30, 1996 compared to the corresponding period of
1995. The decrease is primarily a result of expenses associated with the sale of
Alaska Cablevision's assets as described below and an increase in programming
costs and operating expenses that on a percentage basis exceeded the
corresponding increase in revenues.

Certain of Alaska Cablevision's expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation.

LIQUIDITY AND CAPITAL RESOURCES. Sources of cash during the first six
months of 1996 included Alaska Cablevision's operating activities which
generated positive cash flow of $802,000 net of changes in the components of
working capital. Cash provided by operating activities decreased $162,000 for
the six-month period ended June 30, 1996 compared to the corresponding period of
1995 resulting primarily from the net effect of the decrease (receipt) of
subscriber receivables, other receivables and prepaid assets in 1995 and the
decrease (payment) of payables, accrued expenses and deferred revenues in 1996.

Cash used in investing activities decreased $214,000 to $227,000 for the
six-month period ended June 30, 1996 compared to the corresponding period of
1995. The 1995 decrease results primarily from reduced capital expenditures
related to purchases of property, plant and equipment.

Cash used in financing activities totaled $486,000 and $177,000 during the
six-month periods ended June 30, 1996 and 1995, respectively. Uses of cash in
1996 resulted primarily from repayment on notes due to former stockholders of
$109,000 and distributions to stockholders of $374,000. Uses of cash in 1995
resulted primarily from repayment on notes due to former stockholders of
$101,000 and distributions to stockholders of $348,000. Proceeds from a new
senior revolving credit loan agreement totaling $3.7 million were used in 1995
to payoff $3.4 million in loans from affiliates.

Alaska Cablevision's primary need for capital has been to finance plant
rebuilds and upgrades, channel additions and service vehicles. Alaska
Cablevision spent $227,000 during for the six-month period ended June 30, 1996
on capital expenditures and currently intends to spend approximately $525,000 in
1996 for capital expenditures, including $75,000 to extend its plan to new
service areas. The recorded cost of assets disposed of totaled approximately
$54,000 for the six-month period ended June 30, 1996 resulting from the
replacement of vehicles and corporate office equipment.

F-76
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)

GENERAL. The following unaudited pro forma combined statement of operations
has been prepared to reflect the acquisition of the Cable Systems by the
Company. The results of operations for McCaw/Rock Homer and McCaw/Rock Seward
have not been included as they are not significant to the acquisition. The
acquisition was accounted for using the purchase method of accounting.

The unaudited pro forma combined statement of operations for the year ended
December 31, 1996 gives effect to the acquisition as if it occurred as of the
beginning of the year presented and combines (1) the Company's (excluding Cable
operations) historical income for the year ended December 31, 1996; and (2)
Cable operations which consist of Prime's, Alaska Cablevision's and Alaskan
Cable's historical statements of operations for the ten months ended October 31,
1996 and GCI Cable's historical statement of operations for the two months ended
December 31, 1996.

The unaudited pro forma combined condensed statement of operations does not
purport to represent what the Company's results of operations would actually
have been had the acquisition occurred at the beginning of the year presented or
to project any future results of operations of the Company. The pro forma
adjustments are based on available information and upon assumptions that the
Company's management believes are reasonable under the circumstances. These
adjustments are directly attributable to the acquisition indicated and are
expected to have a continuing impact on the results of operations of the
Company.

The pro forma combined statement of operations should be read in conjunction
with the historical financial statements and notes thereto of the Company,
Prime, Alaska Cablevision, and Alaskan Cable.

F-77
<PAGE>
GENERAL COMMUNICATION, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996

($ IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
COMPANY CABLE PRO FORMA PRO FORMA
(WITHOUT CABLE) (COMBINED) ADJUSTMENTS AMOUNTS
--------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Telecommunciation services.............................. $ 155,419 0 0 155,419
Cable services.......................................... 0 55,343 0 55,343
--------------- ----------- ------------- -----------
Total revenues...................................... 155,419 55,343 0 210,762
Cost of sales and services.............................. 90,597 13,583 0 104,180
Selling, general and administrative expenses (1)........ 43,420 17,098 (1,363) 59,155
Depreciation and amortization (2)....................... 7,189 22,005 (8,640) 20,553
--------------- ----------- ------------- -----------
Operating income.................................... 14,213 2,657 10,003 26,873
Interest expense, net (3)............................... 1,223 10,918 3,370 15,511
Other income (expense).................................. 0 33 0 33
--------------- ----------- ------------- -----------
Net earnings (loss) before income taxes............. 12,990 (8,228) 6,633 11,395
Income tax expense (4).................................. 5,318 (63) (560) 4,695
--------------- ----------- ------------- -----------
Net earnings (loss)................................. $ 7,672 (8,165) 7,193 6,700
--------------- ----------- ------------- -----------
--------------- ----------- ------------- -----------
Earnings per share common share..................... 0.16
-----------
-----------
Weighted average shares 41,604
-----------
-----------
EBITDA (5) 47,427
-----------
-----------
</TABLE>

ADJUSTMENTS.

The pro forma adjustments to the unaudited pro forma combined statement of
operations for the year ended December 31, 1996 are as follows:

(1) Pursuant to the Prime Management Agreement, Prime has agreed to oversee,
manage and supervise the development and operation of the Cable Systems.The
Company has agreed to pay Prime $1.0 million for these services in year one
of the agreement.Accordingly, the historical management fees are eliminated
from selling, general and administrative expenses and $1.0 million of
management fees included.

(2) Represents adjustments to depreciation and amortization expense resulting
from the adjusted carrying values, and lives of tangible and intangible
assets.Goodwill, certificates of operating rights and PCS license are being
amortized over 40 years.

(3) Elimination of historical interest expense incurred by the Cable Systems
with interest accrued on GCI Cable debt of $175.9 million as if it was
outstanding for the entire year at 8.12%.

(4) Income tax expense is computed using the Company's consolidated effective
tax rate for 1996 of 41.2%.

(5) EBITDA consists of earnings before interest (net), income taxes,
depreciation, amortization and other income (expense).

F-78
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS
OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH SOLICITATION.

--------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................ 4
Risk Factors.................................. 15
The Company................................... 22
Use Of Proceeds............................... 25
Capitalization................................ 26
Selected Consolidated Financial Data.......... 27
Selected Unaudited Combined Historical and Pro
Forma Cable System Financial and Operating
Data........................................ 29
Selected Cable Company Financial Data......... 31
Management's Discussion And Analysis Of
Financial Condition And Results Of
Operations.................................. 33
Business...................................... 47
Management.................................... 80
Certain Transactions.......................... 89
Principal and Selling Shareholders............ 94
Description Of Credit Facility................ 98
Description Of Notes.......................... 99
Underwriting.................................. 125
Legal Matters................................. 126
Experts....................................... 126
Available Information......................... 127
Glossary...................................... 127
Index To Financial Statements................. F-1
</TABLE>

UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

$150,000,000

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

% SENIOR NOTES DUE 2007

[LOGO]

SALOMON BROTHERS INC

SCHRODER WERTHEIM & CO.

NATIONSBANC CAPITAL MARKETS, INC.

TD SECURITIES

PROSPECTUS

DATED , 1997
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following are the estimated expenses of the offering of the Notes being
registered, all of which will be paid by the Issuer.

<TABLE>
<S> <C>
Accounting Fees*............................................... $
Costs of Printing*............................................. $
Legal Fees*.................................................... $
Registration/Filing Fees
Securities Act of 1933....................................... $45,454.55
Blue Sky Compliance*......................................... $
NASD Filing Fee................................................ $15,500.00
Trustee Fees................................................... $
Miscellaneous*................................................. $
----------
TOTAL...................................................... $
----------
----------
</TABLE>

- ------------------------

*Estimated

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Issuer's Bylaws provide for indemnification of directors and officers
(and their respective heirs and personal representatives) of the Issuer against
all losses, damages, costs and expenses incurred in connection with any action,
suit or proceeding (civil or criminal) brought against such person by reason of
the fact that he or she is or was a director or officer of the Issuer or served
any other enterprise in which the Issuer is a creditor as a director or officer
at the request of the Issuer. The Issuer will only indemnify an officer or
director upon a determination by a majority vote of the disinterested members of
the Board, by a majority vote of the shareholders of the Issuer or by
independent legal counsel that the person to be indemnified has met the
applicable standard of conduct. No indemnification will be made in respect of
any claim, issue or matter as to which the director or officer is adjudged to be
liable for negligence or misconduct.

The Articles of Incorporation of the Issuer provide that directors will not
be liable to the Issuer for monetary damages for breach of a fiduciary duty
unless such breach involves a breach of the duty of loyalty, bad faith,
intentional misconduct, a knowing violation of law or the derivation by such
director of an improper personal benefit. The Issuer's Bylaws further provide
that no officer or director will be liable to the Issuer for acts or omissions
in good faith, provided such person exercised the same degree of care and skill
that a prudent person would have exercised in the conduct of his or her own
affairs.

As of the date of this Registration Statement, the Issuer had not received
any notice or request regarding indemnification of any officer, director or
employee of the Issuer.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The Issuer has not issued or sold any securities within the past three
years.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits. See Exhibit Index at end of this Registration Statement.

(b) Financial Statement Schedules

<TABLE>
<CAPTION>
Valuation and Qualifying Accounts..................................... S-1
<S> <C>
</TABLE>

II-1
<PAGE>
ITEM 17. UNDERTAKINGS.

(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(2) The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it
was declared effective.

(b) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

II-2
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the Municipality of
Anchorage, State of Alaska, on May 29, 1997.

GCI, INC.
(Registrant)

By: /s/ RONALD A. DUNCAN
-----------------------------------------
Ronald A. Duncan, PRESIDENT

II-3
<PAGE>
POWER OF ATTORNEY

We, the undersigned officers and directors of GCI, Inc., do hereby
constitute and appoint Ronald A. Duncan and John M. Lowber, and each of them,
our true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for each of us and in our name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith
and about the premises, as fully to all intents and purposes as each of us might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ RONALD A. DUNCAN Director and President
- ------------------------------ (Principal Executive May 29, 1997
Ronald A. Duncan Officer)

Director, Secretary and
/s/ JOHN M. LOWBER Treasurer (Principal
- ------------------------------ Financial and Accounting May 29, 1997
John M. Lowber Officer)

/s/ G. WILSON HUGHES
- ------------------------------ Director May 29, 1997
G. Wilson Hughes

II-4
<PAGE>
SCHEDULE VIII

GENERAL COMMUNICATION, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
-------------------------- -------------
BALANCE AT CHARGED TO WRITE-OFFS
BEGINNING OF PROFIT AND NET OF BALANCE AT
DESCRIPTION YEAR LOSS OTHER RECOVERIES END OF YEAR
- ---------------------------------------------------- ------------- ------------- ----------- ------------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful receivables................ $ 295 1,736 354(1) 1,788 597
----- ----- --- ----- ---
----- ----- --- ----- ---
Year ended December 31, 1995:
Allowance for doubtful receivables................ $ 409 1,459 -- 1,573 295
----- ----- --- ----- ---
----- ----- --- ----- ---
Year ended December 31, 1994:
Allowance for doubtful receivables................ $ 721 829 -- 1,141 409
----- ----- --- ----- ---
----- ----- --- ----- ---
</TABLE>

- ------------------------

(1) Allowance for doubtful receivables acquired pursuant to the Cable Company
acquisitions described in footnote (2) to the Company's consolidated
financial statements.

S-1
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- -------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1 Underwriting Agreement*.....................................................................
3.1 Articles of Incorporation of the Issuer.....................................................
3.2 Bylaws of the Issuer........................................................................
4.1 Form of Indenture relating to the Notes (including Form of Note)*...........................
5.1 Opinion of Wohlforth, Argetsinger, Johnson & Brecht, A Professional Corporation*............
5.2 Opinion of Sherman & Howard L.L.C.*.........................................................
9.1 Voting Agreement dated October 31, 1996, among Prime II Management L.P., as agent for the
Voting Prime Sellers, MCI Telecommunications Corporation, Ronald A. Duncan, Robert M. Walp
and TCI GCI, Inc.(11).....................................................................
10.1 Credit Facility*............................................................................
10.2 Registration Rights Agreement, dated as of January 18, 1991, between General Communication,
Inc. and WestMarc Communications, Inc(1)..................................................
10.3 Employee stock option agreements issued to individuals Spradling, O'Hara, Strid, Behnke,
Lewkowski and Snyder(2)...................................................................
10.4 Registration Rights Agreement, dated October 31, 1996, between General Communication, Inc.
and the Prime Sellers(11).................................................................
10.5 Registration Rights Agreement, dated October 31, 1996, between General Communication, Inc.,
and Alaskan Cable Network/Fairbanks, Inc. ("ACNFI"), Alaskan Cable Network/Juneau, Inc.
("ACNJI"), Alaskan Cable Network/ Ketchikan-Sitka, Inc. ("ACNKSI") and Jack Kent Cooke,
Inc.(11)..................................................................................
10.6 Registration Rights Agreement, dated October 31, 1996, between General Communication, Inc.,
and the owners of Alaska Cablevision, Inc. ("ACI")(11)....................................
10.7 Lease agreement between GCI Communication Services, Inc. and National Bank of Alaska Leasing
Corporation dated January 15, 1992(3).....................................................
10.8 Westin Building Lease(4)....................................................................
10.9 Duncan and Hughes Deferred Bonus Agreements(5)..............................................
10.10 Compensation Agreement between General Communication, Inc. and William C. Behnke dated
January 1, 1997*..........................................................................
10.11 Order approving Application for a Certificate of Public Convenience and Necessity to operate
as a Telecommunications (Intrastate Interexchange Carrier) Public Utility within
Alaska(2).................................................................................
10.12 1986 Stock Option Plan, as amended(3).......................................................
10.13 Loan agreement between National Bank of Alaska and GCI Leasing Co., Inc. dated December 31,
1992(3)...................................................................................
10.14 Pledge and Security Agreement between National Bank of Alaska and GCI Communication
Services, Inc. dated December 31, 1992(3).................................................
10.15 Lease Agreement between MCI Telecommunications Corporation and GCI Leasing Co., Inc. dated
December 31, 1992(3)......................................................................
10.16 Sublease Agreement between MCI Telecommunications Corporation and General Communication,
Inc. dated December 31, 1992(3)...........................................................
10.17 Financial Assistance Agreement between MCI Telecommunications Corporation and GCI Leasing
Co., Inc. dated December 31, 1992(3)......................................................
10.18 Letter of intent between MCI Telecommunications Corporation and General Communication, Inc.
dated December 31, 1992(6)................................................................
10.19 MCI Carrier Agreement between MCI Telecommunications Corporation and General Communication,
Inc. dated January 1, 1993(7).............................................................
10.20 Contract for Alaska Access Services Agreement between MCI Telecommunications Corporation and
General Communication, Inc. dated January 1, 1993(7)......................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- -------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
10.21 Promissory Note Agreement between General Communication, Inc. and Ronald A. Duncan, dated
August 13, 1993(8)........................................................................
10.22 Deferred Compensation Agreement between General Communication, Inc. and Ronald A. Duncan,
dated August 13, 1993(8)..................................................................
10.23 Pledge Agreement between General Communication, Inc. and Ronald A. Duncan, dated August 13,
1993(8)...................................................................................
10.24 Revised Qualified Employee Stock Purchase Plan of General Communication, Inc.(9)............
10.25 Summary Plan Description pertaining to the Revised Qualified Employee Stock Purchase Plan of
General Communication, Inc.(9)............................................................
10.26 The GCI Special Non-Qualified Deferred Compensation Plan(10)................................
10.27 Transponder Purchase Agreement for Galaxy X between Hughes Communications Galaxy, Inc. and
GCI Communication Corp.(10)...............................................................
10.28 Equipment Purchase Agreement between GCI Communication Corporation and Scientific-Atlanta,
Inc.(10)..................................................................................
10.29 Management Agreement, between Prime II Management, L.P., and GCI Cable, Inc., dated October
31, 1996(11)..............................................................................
10.30 Third Amended and Restated Credit Agreement, dated as of October 31, 1996, between GCI
Communication Corp., and NationsBank of Texas, N.A.(12)...................................
10.31 Loan Agreement among GCI Cable, Inc., as Borrower and Toronto-Dominion (Texas), Inc., et
al., as of October 31, 1996(12)...........................................................
10.32 Licenses(4).................................................................................
214 Authorization
International Resale Authorization
Digital Electronic Message Service Authorization
Fairbanks Earth Station License
Fairbanks (Esro) Construction Permit for P-T-P Microwave Service
Fairbanks (Polaris) Construction Permit for P-T-P Microwave Service
Anchorage Earth Station Construction Permit
License for Eagle River P-T-P Microwave Service
License for Juneau Earth Station
Issaquah Earth Station Construction Permit
10.33 ATU Interconnection Agreement*
10.34 First Amendment to Third Amended and Restated Credit Agreement entered into among GCI
Communication Corp., NationsBank of Texas, N.A., Toronto Dominion (Texas), Inc., Credit
Lyonnais New York Branch, and National Bank of Alaska(14)
10.35 Committment to extend Third Amended and Restated Credit Agreement entered into among GCI
Communication Corp., NationsBank of Texas, N.A., Toronto Dominion (Texas), Inc., Credit
Lyonnais New York Branch, and National Bank of Alaska*
10.36 Securities Purchase and Sale Agreement, dated May 2, 1996, among General Communication,
Inc., and the Prime Sellers(12)
10.37 Agreement and Plan of Merger of ACI with and into GCI Cable, Inc., dated October 31,
1996(11)
10.38 Certificate of Merger Merging ACI into GCI Cable, Inc. (filed in Delaware on October 31,
1996)(11)
10.39 Articles of Merger between GCI Cable Inc., and ACI (filed in Delaware on October 31,
1996)(11)
10.40 Agreement and Plan of Merger of PCFI with and into GCI Cable, Inc., dated October 31,
1996(11)
10.41 Certificate of Merger Merging PCFI into GCI Cable, Inc., (filed in Delaware on October 31,
1996)(11)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- -------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
10.42 Articles of Merger between GCI Cable, Inc., and PCFI (for filing in Alaska)(11)
10.43 Asset Purchase Agreement, dated April 15, 1996, among General Communication, Inc., ACNFI,
ACNJI and ACNKSI(11)
10.44 Asset Purchase Agreement, dated May 10, 1996, among General Communication, Inc., and Alaska
Cablevision, Inc.(11)
10.45 Asset Purchase Agreement, dated May 10, 1996, among General Communication, Inc., and
McCaw/Rock Homer Cable System, J.V.(11)
10.46 Asset Purchase Agreement, dated May 10, 1996, between General Communication, Inc., and
McCaw/Rock Seward Cable System, J.V.(11)
10.47 Amendment No. 1 to Securities Purchase and Sale Agreement, dated October 31, 1996, among
General Communication, Inc., and the Prime Sellers Agent(12)
10.48 First Amendment to Asset Purchase Agreement, dated October 30, 1996, among General
Communication, Inc., ACNFI, ACNJI and ACNKSI(12)
10.49 Amendment to Revised Qualified Employee Stock Purchase Plan of General Communication, Inc.*
10.50 Agreement Regarding Exchange of Shares*
10.51 Form of Agreement Waiving Right to Exercise Stock Options*
12.1 Statement regarding computation of ratio of earnings to fixed charges.......................
21.1 Subsidiaries of the Registrant..............................................................
23.1 Consent of KPMG Peat Marwick LLP (Accountant for Company)...................................
23.2 Consent of Ernst & Young LLP (Accountants for Prime for 1994 and 1995 and accountants for
Alaskan Cable for 1993, 1994 and 1995)....................................................
23.3 Consent of Carl & Carlsen (Accountant for Alaska Cablevision)...............................
23.4 Consent of Wohlforth, Argetsinger, Johnson & Brecht, A Professional Corporation*............
23.5 Consent of Sherman & Howard L.L.C.*.........................................................
24.1 Power of Attorney (included with the signature page to the Registration Statement)..........
25.1 Statement of Eligibility of Trustee from Bank of New York...................................
99.1 Additional Exhibits
The Articles of Incorporation of GCI Communication Corp.(1)...............................
The By-laws of GCI Communication Corp.(1).................................................
The Articles of Incorporation of GCI Communication Services, Inc.(3)......................
The By-laws of GCI Communication Services, Inc.(3)........................................
The Articles of Incorporation of GCI Leasing Co., Inc.(3).................................
The By-laws of GCI Leasing Co., Inc.(3)...................................................
99.2 The By-laws of GCI Cable, Inc.(13)..........................................................
99.3 The Articles of Incorporation of GCI Cable, Inc.(13)........................................
99.4 The By-laws of GCI Cable / Fairbanks, Inc.(13)..............................................
99.5 The Articles of Incorporation of GCI Cable / Fairbanks, Inc.(13)............................
99.6 The By-laws of GCI Cable / Juneau, Inc.(13).................................................
99.7 The Articles of Incorporation of GCI Cable / Juneau, Inc.(13)...............................
99.8 The By-laws of GCI Cable Holdings, Inc.(13).................................................
99.9 The Articles of Incorporation of GCI Cable Holdings, Inc.(13)...............................
99.10 The By-laws of GCI Holdings, Inc.*..........................................................
99.11 The Articles of Incorporation of GCI Holdings, Inc.*........................................
</TABLE>

- ------------------------------

* To be filed by amendment.

1 Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 1994

2 Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1990

3 Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991

4 Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992
<PAGE>
5 Incorporated by reference to the Company's Registration Statement on Form 10
(File No. 0-15279), mailed to the Securities and Exchange Commission on
December 30, 1986

6 Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1989.

7 Incorporated by reference to the Company's Current Report on Form 8-K dated
January 13, 1993.

8 Incorporated by reference to the Company's Current Report on Form 8-K dated
June 4, 1993.

9 Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993.

10 Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.

11 Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.

12 Incorporated by reference to the Company's Form S-4 Registration Statement
dated October 4, 1996.

13 Incorporated by reference to the Company's Current Report on Form 8-K dated
November 13, 1996.

14 Incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.

15 Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 1997.

<PAGE>

ARTICLES OF INCORPORATION

GCI, INC.

We, the undersigned natural persons over the age of eighteen (18) years,
acting as incorporators of a corporation under the Alaska Corporation Code, AS
10.06, do hereby adopt the following Articles of Incorporation for such
corporation.

ARTICLE I - NAME

The name of the corporation ("Corporation") is: GCI, INC.

ARTICLE II - PURPOSES AND POWERS

The purpose for which the Corporation is organized is to provide
telecommunication and cable business services, and in general, to pursue any
lawful purpose authorized under the Alaska Corporations Code.

The Corporation shall have and may exercise all of the general powers of a
natural person, including those provided in AS 10.06.010, as amended, and may
transact any or all lawful business for which corporations may be incorporated
under the Alaska Corporations Code.

ARTICLE III - REGISTERED OFFICE AND AGENT

The address of the Corporation's registered office and the name of its
registered agent is Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., 717 "K"
Street, Anchorage, AK 99501.

ARTICLE IV - CAPITAL

The Corporation shall have the authority to issue ten thousand (10,000)
shares of no par value stock. These shares shall be common voting shares, each
share having one (1) vote.

ARTICLE V - NO PRESUMPTIVE RIGHTS

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<PAGE>

Pursuant to AS 10.06.210(a)(1)(B), no holder of any stock of the
Corporation shall be entitled to purchase, subscribe for or otherwise acquire,
as a matter of right, any new or additional shares of stock, of any class, in
the Corporation, any options or warrants to purchase, subscribe for or otherwise
acquire any new or additional shares in the Corporation, or any shares, bonds,
notes, debentures, or other securities convertible into or carrying options or
warrants to purchase, subscribe for or otherwise acquire any such shares.

ARTICLE VI - NO CUMULATIVE VOTING

Pursuant to AS 10.06.420(d), shareholders shall not cumulate their votes,
but must vote shares held by them for as many persons as there are directors to
be elected.
ARTICLE VII - POWER TO REDEEM SHARES

Pursuant to AS 10.06.325, the Corporation has the power on majority vote of
the shareholders, to redeem, in whole or in part, any class of outstanding
shares.

ARTICLE VIII - QUORUM OF SHAREHOLDERS

A quorum for the conducting of any shareholder business shall be fifty-one
percent (51%) of all outstanding shares that are entitled to vote.

ARTICLE IX - INITIAL DIRECTORS

The initial number of directors of the Corporation shall be three (3).
The names and addresses of the initial directors, who shall serve until the
first annual meeting of shareholders or until their successors are elected
and qualified are as follows:

Ronald A. Duncan
2550 Denali Street, Suite 1000
Anchorage, AK 99503

John M. Lowber
2550 Denali Street, Suite 1000
Anchorage, AK 99503

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<PAGE>

Wilson Hughes
2550 Denali Street, Suite 1000
Anchorage, AK 99503

The number of directors may be increased or decreased from time to time by
an amendment of the Bylaws; but no decrease shall have the effect of shortening
the term of any incumbent director. The directors may fill any vacancy on the
board created by reason of removal or retiring of any director.

ARTICLE X - ALIEN AFFILIATES

The Corporation is not affiliated with any nonresident alien or a
corporation whose place of incorporation is outside the United States (as
defined in AS 10.06.990(2) and (3)).

ARTICLE XI - LIABILITY OF DIRECTORS

The directors of the Corporation shall not be liable to the Corporation for
monetary damages for a breach of fiduciary duty except for:

(1) A breach of a director's duty of loyalty to the Corporation;

(2) Acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; or

(3) A transaction from which the director derives an improper
personal benefit.

ARTICLE XII - BYLAWS

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<PAGE>

The initial Bylaws of the Corporation shall be adopted by the Board of
Directors, and the power to alter, amend or repeal the Bylaws shall be reserved
to the board. The Bylaws may contain any provision for the regulation and
management of the affairs of the Corporation not inconsistent with the Alaska
Corporation Code or with these Articles of Incorporation.

ARTICLE XIII - DURATION

The duration of the Corporation shall be perpetual.

ARTICLE XIV - EFFECTIVE DATE

These Articles will be effective upon filing.

IN WITNESS WHEREOF, I have signed these Articles this _____ day of May,
1997.

---------------------------------------
Robert B. Flint

IN WITNESS WHEREOF, I have signed these Articles this _____ day of May,
1997.

---------------------------------------
Bonnie J. Paskvan

STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )

ROBERT B. FLINT says on oath or affirms that he has read the foregoing
ARTICLES OF INCORPORATION OF GCI, INC., and believes all statements made in
the document are true and correct.

---------------------------------------

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<PAGE>

Notary Public in and for the State of Alaska
My commission expires:
--------------------
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )

BONNIE J. PASKVAN says on oath or affirms that she has read the foregoing
ARTICLES OF INCORPORATION OF GCI, INC., and believes all
statements made in the document are true and correct.

---------------------------------------
Notary Public in and for the State of Alaska
My commission expires:
--------------------

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<PAGE>

BYLAWS

GCI, INC.

<PAGE>

TABLE OF CONTENTS
-----------------

ARTICLE I OFFICES............................................................1

ARTICLE II SHAREHOLDERS' MEETINGS.............................................1
Section 1. ANNUAL MEETING................................................1
Section 2. SPECIAL MEETINGS..............................................1
Section 3. PLACE OF MEETING..............................................2
Section 4. NOTICE OF MEETING.............................................2
Section 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE............2
Section 6. VOTING LISTS..................................................3
Section 7. QUORUM........................................................3
Section 8. PROXIES.......................................................3
Section 9. VOTING OF SHARES..............................................3
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS..........................4
Section 11. INFORMAL ACTION BY SHAREHOLDERS..............................4

ARTICLE III BOARD OF DIRECTORS.................................................4
Section 1. GENERAL POWERS................................................4
Section 2. NUMBER, TENURE AND QUALIFICATIONS.............................4
Section 3. REGULAR MEETINGS..............................................5
Section 4. SPECIAL MEETINGS..............................................5
Section 5. QUORUM........................................................5
Section 6. MANNER OF ACTING..............................................5
Section 7. ATTENDANCE AT MEETINGS........................................5
Section 8. VACANCIES.....................................................6
Section 9. COMPENSATION..................................................6
Section 10. PRESUMPTION OF ASSENT........................................6
Section 11. REMOVAL OF DIRECTORS.........................................6
Section 12. RESIGNATION..................................................6
Section 13. VOTING BY INTERESTED DIRECTORS...............................7
Section 14. ACTION BY DIRECTORS WITHOUT A MEETING........................7

ARTICLE IV OFFICERS...........................................................7
Section 1. NUMBER........................................................7
Section 2. ELECTION AND TERM OF OFFICE...................................7
Section 3. REMOVAL.......................................................7
Section 4. VACANCIES.....................................................7
Section 5. PRESIDENT.....................................................8
Section 6. VICE PRESIDENTS...............................................8
Section 7. THE SECRETARY.................................................8
Section 8. THE TREASURER.................................................9

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Section 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS................9
Section 10. SALARIES......................................................9

ARTICLE V LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS,
OFFICERS AND AGENTS OF THE CORPORATION.............................9
Section 1. LIMITATION OF LIABILITY.......................................9
Section 2. RIGHT OF INDEMNIFICATION.....................................10
Section 3. RIGHTS CUMULATIVE............................................10

ARTICLE VI CONTRACTS, LOANS, CHECKS, DEPOSITS AND COMPENSATION...............11
Section 1. CONTRACTS....................................................11
Section 2. LOANS........................................................11
Section 3. CHECKS, DRAFTS, ETC..........................................11
Section 4. DEPOSITS.....................................................11

ARTICLE VII CERTIFICATES FOR SHARES AND THEIR TRANSFER.....................11
Section 1. CERTIFICATES FOR SHARES......................................11
Section 2. TRANSFER OF SHARES...........................................12

ARTICLE VIII TAXABLE YEAR AND ACCOUNTING PERIOD.............................12

ARTICLE IX DIVIDENDS.........................................................12

ARTICLE X CORPORATE SEAL....................................................12

ARTICLE XI WAIVER OF NOTICE..................................................13

ARTICLE XII AMENDMENTS........................................................13

ARTICLE XIII EXECUTIVE COMMITTEE.............................................13
Section 1. APPOINTMENT..................................................13
Section 2. AUTHORITY....................................................13
Section 3. TENURE AND QUALIFICATIONS....................................13
Section 4. MEETINGS.....................................................13
Section 5. QUORUM.......................................................14
Section 6. ACTION WITHOUT A MEETING.....................................14
Section 7. VACANCIES....................................................14
Section 8. RESIGNATIONS AND REMOVAL.....................................14
Section 9. PROCEDURE....................................................14

ARTICLE XIV CONDUCT OF MEETINGS..............................................15

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<PAGE>

ARTICLE I
OFFICES

The principal office of GCI, Inc. (the "Corporation") shall be located
in Anchorage, Alaska. The Corporation may have such other offices, either
within or without the State of Alaska, as the Board of Directors may
designate or as the business of the Corporation may require from time to time.

The registered office of the Corporation required by the Alaska
Corporations Code to be maintained in the State of Alaska may be, but need not
be, identical with the principal office in the State of Alaska, and the address
of the registered office may be changed from time to time by the Board of
Directors.

ARTICLE II
SHAREHOLDERS' MEETINGS

Section 1. ANNUAL MEETING. The annual meeting of the Shareholders shall
be held in the month of June of each year, for the purpose of electing Directors
and for the transaction of such other business as may come before the meeting.
If the election of Directors shall not be held on the day designated for the
annual meeting of the Shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
Shareholders as soon thereafter as it conveniently may be held.

(a) Meetings of the Shareholders shall be presided over by the
President or by any officer or Director or person selected at any time by the
President to act as Chairman, or if he is not present or available or makes no
selection, then by the Chairman of the Board of Directors. If neither the
President nor the Chairman of the Board of Directors is present and no selection
has been made, a Chairman should be chosen by a majority in interest of the
Shareholders present in person or by proxy at the meeting and entitled to vote
thereat.

(b) The Secretary of the meeting shall be the Secretary of the
Corporation or an Assistant Secretary, or if none of such officers is present,
any person appointed by the Chairman of the meeting.

Section 2. SPECIAL MEETINGS. Special meetings of the Shareholders for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, and shall be called by the President
at the request of the holders of not less than one-tenth of all the outstanding
shares of the corporation entitled to vote at the meeting.

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<PAGE>

Section 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Alaska, as the place of meeting
called by the Board of Directors. A waiver of notice signed by all Shareholders
entitled to vote at a meeting may designate any place, either within or without
the State of Alaska, as the place for the holding of such meeting. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the Corporation in the State of Alaska.

Section 4. NOTICE OF MEETING. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than twenty (20)
nor more than sixty (60) days before the date of the meeting, either personally
or by mail, by or at the direction of the President, or the Secretary, or the
persons calling the meeting, to each Shareholder of record entitled to vote at
such meeting. If mailed, the notice is considered delivered when deposited with
postage prepaid in the United States mail addressed to the shareholder at the
address of the shareholder as it appears on the stock transfer book of the
corporation, or, if the shareholder has filed with the secretary of the
corporation a written request that notice be mailed to a different address,
addressed to the shareholder at the new address.

Section 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, or Shareholders entitled to
receive payment of a dividend, or in order to make a determination of
Shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, seventy (70) days. If the stock
transfer books shall be closed for the purpose of determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders, such books shall
be closed for at least twenty (20) days immediately preceding such meeting.

Instead of closing the stock transfer books, the Board of Directors may fix
a date as the record date for any such determination of Shareholders. This
record date shall be not more than sixty (60) days, and in case of a meeting of
Shareholders not less than twenty (20) days, prior to the date on which the
particular action requiring such determination of Shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of Shareholders entitled to notice of or to vote at a meeting of
Shareholders, or Shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring the dividend is adopted is, as
the case may be, the record date for the determination of Shareholders. When a
determination of Shareholders entitled to vote at any meeting of Shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of closing has
expired.

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<PAGE>

Section 6. VOTING LISTS. At least twenty (20) days before each meeting of
the Shareholders, the officer or agent having charge of the stock transfer books
for shares of the Corporation shall make a complete list of the Shareholders
entitled to vote at each meeting of Shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. The list shall be kept on file at the registered office of the
corporation and is subject to inspection by a Shareholder or the agent or
attorney of a Shareholder at any time during the usual business hours for a
period of twenty (20) days before the meeting. Such list shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any Shareholder during the whole time of the meeting.

Section 7. QUORUM. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of Shareholders. If a quorum is present, the
affirmative vote of the majority of shares represented at the meeting and
entitled to vote on the subject matter is the act of the Shareholders unless the
vote of a greater number or voting by class is required by the articles of
incorporation, bylaws or the Alaska Corporations Code.

The Shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken other than
adjournment is approved by at least a majority of shares required to constitute
a quorum.

If less than a majority of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.

Section 8. PROXIES. At all meetings of Shareholders, a Shareholder may
vote in person or by proxy executed in writing by the Shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. A proxy continues in full
force and effect until revoked by the person executing it, however, no proxy
shall be valid after eleven (11) months from the date of its execution, unless
such proxy qualifies as an irrevocable proxy as defined within AS 10.06.418(e).

Section 9. VOTING OF SHARES. An outstanding share, regardless of class,
is entitled to one vote on each matter submitted to a vote at a meeting of
Shareholders, except as may be otherwise provided in the articles of
incorporation.

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<PAGE>

Section 10. VOTING OF SHARES BY CERTAIN HOLDERS.

(a) Shares standing in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such corporation may prescribe,
or, in the absence of such provisions, as the board of directors of such
corporation may determine.

(b) Shares held by an administrator, executor, guardian or conservator may
be voted by such person, either in person or by proxy, without a transfer of
such shares into his name. Shares standing in the name of a trustee may be
voted by the trustee, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name.

(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer into his name if authority to transfer the
shares is contained in an appropriate order of the court by which such receiver
was appointed.

(d) A Shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.

(e) Neither treasury shares, nor shares of its own stock held by the
Corporation in a fiduciary capacity, nor shares held by another corporation if a
majority of the shares entitled to vote for the election of directors of the
other corporation is held by the Corporation, may be voted at a meeting or
counted in determining the total number of outstanding shares.

Section 11. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the Shareholders, or any other action which may be taken
at a meeting of the Shareholders, may be taken without a meeting by written
consent, identical in content setting out the action taken, signed by all of the
Shareholders entitled to vote on the action.

ARTICLE III
BOARD OF DIRECTORS

Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors.

Section 2. NUMBER, TENURE AND QUALIFICATIONS. The number of Directors of
the Corporation shall be not less than one (1) nor more than nine (9); unless
the Corporation, now or at any time in the future, has three (3) or more
Shareholders in which case the Corporation shall have not fewer than three (3)
directors; or unless the Corporation has

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<PAGE>

only two (2) Shareholders, in which case the Corporation shall have at least two
(2) directors. Each Director shall hold office until the next annual meeting of
Shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Alaska or Shareholders of the
Corporation. The initial number of Directors shall be five (5).

Section 3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the annual meeting of the Shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Alaska, for the holding of additional regular meetings without other
notice than such resolution.

Section 4. SPECIAL MEETINGS.

(a) Special meetings of the Board of Directors may be called by the
Chairman of the Board, the President, a Vice President, the Secretary, or a
Director or such person authorized to call the meeting may fix the time and
place for holding the meeting, either inside or outside the State of Alaska.

(b) Notice of any special meeting shall be given at least ten (10) days
prior thereto by written notice delivered personally or mailed to each Director
at his business address, or at least seventy-two (72) hours before the meeting
by electronic means, personal messenger, or comparable person-to-person
communication. If mailed by certified mail, such notice shall be deemed to be
delivered when deposited in the United States mail properly addressed, with
postage thereon prepaid. Any Director may waive notice of any meeting. The
attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.

Section 5. QUORUM. A majority of the presently qualified Directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than such majority is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice; provided, further, that where there are only two Directors, both
shall be necessary to constitute a quorum.

Section 6. MANNER OF ACTING. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.

Section 7. ATTENDANCE AT MEETINGS. The Board of Directors may conduct a
meeting of the Board by communicating simultaneously with each other by means of

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<PAGE>

conference telephones or similar communications equipment and any action taken
at such meeting shall not be invalidated by reason of the fact that the
respective members of the Board were not assembled together in one place at the
time of taking such action or conducting such business.

Section 8. VACANCIES. Where a vacancy created by the removal of a
Director is pursuant to AS 10.06.460 or 10.06.463, such vacancies occurring on
the Board may be filled only by a vote of the Shareholders. Any other vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the Board of
Directors. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of Directors may be filled by election by
the Board of Directors for a term of office continuing only until the next
election of Directors by the Shareholders. In no case may a vacancy continue
longer than six (6) months or until the next annual meeting, whichever occurs
first.

Section 9. COMPENSATION. By resolution of the Board of Directors, each
Director may be paid his or her expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a stated salary as Director or a
fixed sum for attendance at each meeting of the Board of Directors or both. No
such payment shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.

Section 10. PRESUMPTION OF ASSENT. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his/her dissent shall be entered in the minutes of the meeting or unless he/she
shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.

Section 11. REMOVAL OF DIRECTORS. Any Director may be removed with or
without cause, at any time, by a vote of the Shareholders holding a majority of
the shares then issued and outstanding, at any special meeting called for that
purpose, or at the annual meeting. Except as otherwise prescribed by statute, a
Director may be removed for cause by a vote of the majority of the entire board.
Prior to vote by the Board on the question of removal of any Director for cause,
such Director must be given written notice of the reasons for such action.

Section 12. RESIGNATION. A Director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary, or
the Board of Directors of the Corporation, unless the notice specifies a later
time for the effectiveness of the resignation.

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<PAGE>

If the resignation is effective at a future time, a successor may be elected to
take office when the resignation becomes effective.

Section 13. VOTING BY INTERESTED DIRECTORS. No Director may vote upon any
matter in which he has an adverse or personal interest, unless such interest has
been fully disclosed to the Board of Directors and the Board of Directors, by
majority of vote without the interested Director voting, permits such interested
Director to vote.

Section 14. ACTION BY DIRECTORS WITHOUT A MEETING. Action required or
permitted to be taken by the Board or a committee designated by the Board may be
taken without a meeting on written consents, identical in consent, setting out
the action taken and signed by all the members of the Board or the committee.
The written consents shall be filed with the minutes. The consents have the
same effect as an unanimous vote.

ARTICLE IV
OFFICERS

Section 1. NUMBER. The officers of the Corporation shall be a President,
one or more Vice Presidents (the number thereof to be determined by the Board of
Directors), a Secretary, and a Treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two (2) or
more offices may be held by the same person, except the offices of President and
Secretary.

Section 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the Shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
resign or shall have been removed in the manner hereinafter provided.

Section 3. REMOVAL. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.

Section 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.

-8-

<PAGE>

Section 5. PRESIDENT. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the Shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates for shares of the Corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.

Section 6. VICE PRESIDENTS. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Secretary or an Assistant Secretary, certificates for shares of the Corporation;
and shall perform such other duties as from time to time may be assigned to him
by the President or by the Board of Directors.

Section 7. THE SECRETARY. The Secretary shall:

(a) keep the minutes of the proceedings of the Shareholders and of the
Board of Directors in one or more books provided for that purpose;

(b) see that all notices are duly given in accordance with the provisions
of these Bylaws or as required by law;

(c) be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all documents
the execution of which on behalf of the Corporation under its seal is duly
authorized;

(d) keep a register of the post office address of each Shareholder which
shall be furnished to the Secretary by such Shareholder;

(e) sign with the President, or a Vice President, certificates for shares
of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;

(f) have general charge of the stock transfer books of the Corporation; and

-9-

<PAGE>

(g) in general perform all duties incident to the office of the Secretary
and such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.

Section 8. THE TREASURER. The Treasurer shall:

(a) have charge and custody of and be responsible for all funds and
securities of the Corporation;

(b) receive and give receipts for moneys due and payable to the Corporation
from any source whatsoever, and deposit all such moneys in the name of the
Corporation in such banks, trust companies or other depositories as shall be
selected; and

(c) in general perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.

Section 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries, when authorized by the Board of Directors, may sign with the
President or a Vice President certificates for shares of the Corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President of the Board of Directors.

Section 10. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.

ARTICLE V
LIMITATION OF LIABILITY AND
INDEMNIFICATION OF DIRECTORS, OFFICERS
AND AGENTS OF THE CORPORATION

Section 1. LIMITATION OF LIABILITY. No person shall be liable to the
Corporation for any loss or damage suffered by it on account of any action taken
or omitted to be taken in good faith, as a Director, member of a Committee or
Officer of the Corporation, if such person exercised or used the same degree of
care and skill, including reasonable inquiry, as a prudent person would have
exercised or used under the circumstances in the conduct

-10-

<PAGE>

of his/her own affairs. Without limitation on the foregoing, any such person
shall be deemed to have exercised or used such degree of care and skill if such
action were taken or omitted in reliance in good faith upon advice of counsel
for the Corporation, or the books of account or other records of the
Corporation, or reports or information made or furnished to the Corporation by
any officials, accountants, engineers, agents or employees of the Corporation,
or by an independent Certified Public Accountant or auditor, engineer,
appraiser, or other expert employed by the Corporation and selected with
reasonable care by the Board of Directors, by any such committee or by an
authorized officer of the Corporation.

Section 2. RIGHT OF INDEMNIFICATION. Each Director, member of a
Committee, Officer, Agent and Employee of the Corporation, and each former
director, member of a committee, officer, agent and employee of the Corporation,
and any person who may have served at its request as a director, officer, agent
or employee of another Corporation in which it is a creditor, and his heirs and
personal representative shall be indemnified by the Corporation against all loss
or damage suffered and all costs and expenses imposed upon or incurred by him in
connection with or arising out of any action, suit or proceedings (whether civil
or criminal in nature) in which he may be involved, to which he may be a party
by reason of being or having been (or his personal representative or estate
having been) such director, member of a committee, officer, agent or employee,
except in relation to matters as to which he shall be adjudged in such action,
suit or proceeding to be liable for negligence or misconduct in performance of
his duty; provided, however, that the Corporation shall be given reasonable
notice of the institution of such action, suit or proceedings; and in the event
the same shall be settled in whole or in part, the Corporation or its counsel
shall consent to such settlement if it be determined by its counsel or found by
a majority of the Board of Directors then in office and not involved in such
controversy, that such settlement is to the best interest of the Corporation and
that the person to be indemnified was not guilty of negligence or misconduct in
performance of duty.

Indemnification (unless ordered by the court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the director, officer,
employee or committee member has met the applicable standard of conduct. This
determination shall be made (a) by the Board of Directors, by a majority vote of
a quorum consisting of directors who were not parties to the action or
proceeding; or (b) by independent legal counsel in a written opinion, either (i)
if such a quorum is not obtainable, or (ii) if a quorum of disinterested
directors so requests such a written opinion; or (c) by approval of the
outstanding shares.

Section 3. RIGHTS CUMULATIVE. The provisions of this Article V shall not
be deemed exclusive or in limitation of, but shall be cumulative of and in
addition to any other limitations of liability, indemnities, and rights to which
such Director, member of a Committee, Officer, Agent or other person may be
entitled under Alaska Statute, these

-11-

<PAGE>

Bylaws or pursuant to any agreement or resolution of the Board of Directors or
of the Shareholders, or otherwise.

ARTICLE VI
CONTRACTS, LOANS, CHECKS,
DEPOSITS AND COMPENSATION

Section 1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.

Section 2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.

Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.

Section 4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.

ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER

Section 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary and sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation itself or one of
its employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person or entity to whom the
shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled; except that in case
of a lost, destroyed or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the Corporation as the Board of Directors may
prescribe.

-12-

<PAGE>

All shares issued by the Corporation shall contain a legend on the
certificates stating substantially the following:

The shares represented by this certificate have
not been registered under any federal or state
securities law. They have been acquired for
investment and may not be transferred without an
effective registration statement pursuant to such
laws or an opinion of counsel satisfactory to the
corporation that registration is not required.

Section 2. TRANSFER OF SHARES. Transfer of any shares of the Corporation
shall be done in compliance with all federal, state and local securities laws,
and any transfer of in violation thereof is void. Transfer of shares of the
Corporation shall be made only on the stock transfer books of the Corporation by
the holder of record thereof or by its legal representative, who shall furnish
proper evidence of authority to transfer filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate for such
shares. The entity or person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for all
purposes.

ARTICLE VIII
TAXABLE YEAR AND ACCOUNTING PERIOD

The taxable year and accounting period of the Corporation shall begin on
January 1 and end on December 31, unless changed by resolution of the Board of
Directors.

ARTICLE IX
DIVIDENDS

The Board of Directors may from time to time declare, and the Corporation
may pay, dividends on its outstanding shares in cash, property, or its own
shares, except when the Corporation is insolvent, or when the dividend would
render the Corporation insolvent, or when the dividend is contrary to
restrictions contained in the Articles of Incorporation.

ARTICLE X
CORPORATE SEAL

The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal."

ARTICLE XI

-13-

<PAGE>

WAIVER OF NOTICE

Whenever any notice is required to be given to any Shareholder or Director
of the Corporation under the provisions of these Bylaws or under the provisions
of the Articles of Incorporation or under the provisions of the Alaska
Corporation Code, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.

ARTICLE XII
AMENDMENTS

Except as may be provided in the Articles, these Bylaws may be altered,
amended or repealed and new Bylaws may be adopted by the Board of Directors at
any regular or special meeting of the Board of Directors.

ARTICLE XIII
EXECUTIVE COMMITTEE

Section 1. APPOINTMENT. The Board of Directors, by resolution adopted by
a majority of the full board, may designate two (2) or more of its members to
constitute an Executive Committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.

Section 2. AUTHORITY. Except as limited by the Articles or AS 10.06.468,
the Executive Committee, when the Board of Directors is not in session, shall
have and may exercise all of the authority of the Board of Directors except to
the extent, if any, that such authority shall be limited by the resolution
appointing the Executive Committee.

Section 3. TENURE AND QUALIFICATIONS. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his designation and until his successor is designated as
a member of the Executive Committee and is elected and qualified.

Section 4. MEETINGS. Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee
may be called by any member thereof upon not less than five (5) days' notice,
stating the place, date and hour of the meeting, which notice may be written or
oral, and if mailed by certified mail, shall be deemed to be delivered when
deposited in the United States mail addressed to the member of the Executive
Committee at his business address, postage prepaid. Any member of the Executive
Committee may waive notice of any meeting, and no notice of any meeting need be
given to any member thereof who attends in person. The notice of

-14-

<PAGE>

a meeting of the Executive Committee need not state the business proposed to be
transacted at the meeting.

Section 5. QUORUM. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.

Section 6. ACTION WITHOUT A MEETING. Any action that may be taken by the
Executive Committee at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so to be taken, shall be signed by all of the
members of the Executive Committee before such action be taken further. The
Executive Committee can validly conduct a meeting by communicating
simultaneously with each other by means of conference telephones or similar
communications equipment.

Section 7. VACANCIES. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.

Section 8. RESIGNATIONS AND REMOVAL. Any member of the Executive
Committee may be removed at any time, with or without cause, by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the Corporation and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.

Section 9. PROCEDURE. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting thereof held next after the proceedings shall have been taken.

-15-

<PAGE>

ARTICLE XIV
CONDUCT OF MEETINGS

All meetings conducted under these Bylaws shall be governed in accordance
with ROBERTS RULES OF ORDER.

We, the undersigned, hereby certify that the foregoing Bylaws for governing
the operation and management of GCI, Inc., were duly adopted by
the Directors by unanimous written consent, effective as of ________________,
1997.

-------------------------------------
John M. Lowber, Secretary
APPROVED:

- ---------------------------
Ronald A. Duncan, President

-16-

<PAGE>
EXHIBIT 12.1

STATEMENT REGARDING COMPUTATION
OF RATIO OF EARNINGS TO
FIXED CHARGES

GENERAL COMMUNICATION, INC.
SCHEDULE OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
3 MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------ PROFORMA --------------
1992 1993 1994 1995 1996 1996 1996 1997
------ ------- ------- ------- ------- -------- ------ ------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net earnings before income taxes and
cumulative effect of accounting
change................................. 1,524 6,715 11,681 12,601 12,690 11,395 3,687 (657)
Fixed charges:
Interest expense...................... 3,947 2,254 1,539 1,146 4,199 15,512 260 3,949
Capitalized interest.................. 0 0 0 112 1,034 1,034 87 325
Rent.................................. 1,372 1,343 1,419 1,451 2,455 2,788 618 869
------ ------- ------- ------- ------- -------- ------ ------
Total fixed charges................. 5,319 3,597 2,958 2,709 7,688 19,334 965 5,143
Adjustment--subtract capitalized
interest............................... 0 0 0 -112 -1,034 -1,034 -87 -325
Net earnings before income taxes,
cumulative effect of accounting change
and fixed charges...................... 6,843 10,312 14,639 15,198 19,344 29,695 4,565 4,161
------ ------- ------- ------- ------- -------- ------ ------
------ ------- ------- ------- ------- -------- ------ ------
Ratio of earnings to fixed charges...... 1.29 2.87 4.95 5.61 2.52 1.54 4.73 0.81
</TABLE>

<PAGE>
EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
JURISDICTION
OF NAME UNDER WHICH SUBSIDIARY
ENTITY ORGANIZATION DOES BUSINESS
- --------------------------------------- -------------- ---------------------------------------
<S> <C> <C>
General Communication, Inc. Alaska GCI, General Communication, Inc.

GCI Communication Corp. Alaska GCC, GCI Communication Corp.

GCI Communication Services, Inc. Alaska GCI Communication Services

GCI Leasing Co., Inc. Alaska GCI Leasing, GCI Leasing Co.

GCI Cable, Inc. Alaska GCI Cable, GCI Cable, Inc.

GCI Cable/Juneau, Inc. Alaska GCI Cable/Juneau, GCI
Cable/Juneau, Inc.

GCI Cable/Fairbanks, Inc. Alaska GCI Cable/Fairbanks,
GCI Cable/Fairbanks, Inc.

GCI Cable Holdings, Inc. Alaska GCI Cable Holdings,
GCI Cable Holdings, Inc.

GCI Holdings, Inc. Alaska GCI Holdings, Inc.
</TABLE>

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders

The audits referred to in our report dated February 21, 1997 included the
related financial statement schedule as of December 31, 1996, and for each of
the years in the three-year period ended December 31, 1996, included in the
registration statement. The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits. In our opinion, based on our
audits and the report of the other auditors, the financial statement schedule,
when considered in relation to the consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

We consent to the use of our reports included herein and to the reference to
our firm under the headings "Selected Consolidated Financial Data" and "Experts"
in the Prospectus.

/s/ KPMG PEAT MARWICK LLP

Anchorage, Alaska
May 28, 1997

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 18, 1996 (except for the last paragraph of
Note 7, as to which the date is September 9, 1996) with respect to the financial
statements of Prime Cable of Alaska, L.P. and our report dated February 9, 1996
(except for Note 13, as to which the date is March 14, 1996) with respect to the
combined financial statements of the Alaskan Cable Network, both of which
reports are included in the Registration Statement on Form S-1 and related
Prospectus of GCI, Inc. for the registration of $150,000,000 par value Senior
Notes Due 2007, and to the use of our report dated February 14, 1997, with
respect to the consolidated financial statements of GCI Cable, Inc. and
Subsidiaries (not presented separately herein).

/s/ ERNST & YOUNG, LLP

Austin, Texas
May 23, 1997

<PAGE>
EXHIBIT 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
GCI, Inc.:

We hereby consent to the use of our report dated February 27, 1996,
regarding Alaska Cablevision, Inc., and to the reference to our Firm under the
heading "Experts" in the Registration Statement on Form S-1 for a debt offering
by GCI, Inc.

/s/ CARL & CARLSEN

--------------------------------------
CARL & CARLSEN

Edmonds, Washington
May 29, 1997

<PAGE>

THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d)
OF REGULATION S-T
================================================================================

FORM T-1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /

--------------------

THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)

New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)

48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)

--------------------

GCI, Inc.
(Exact name of obligor as specified in its charter)

Alaska To Be Applied For
(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)

--------------------

Debt Securities
(Title of the indenture securities)

===============================================================================

<PAGE>

1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.

- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------

Superintendent of Banks of the State of 2 Rector Street,
New York New York, N.Y.
10006, and Albany,
N.Y. 12203

Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045

Federal Deposit Insurance Corporation Washington, D.C. 20429

New York Clearing House Association New York, New York 10005

(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

Yes.

2. AFFILIATIONS WITH OBLIGOR.

IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.

None.

16. LIST OF EXHIBITS.

EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).

1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1
to Form T-1 filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with Registration Statement
No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)

4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)

-2-
<PAGE>

6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)

7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.

-3-
<PAGE>

SIGNATURE

Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 22nd day of May, 1997.

THE BANK OF NEW YORK

By: /S/ STEPHEN J. GIURLANDO
--------------------------------
Name: STEPHEN J. GIURLANDO
Title: ASSISTANT VICE PRESIDENT

-4-
<PAGE>
EXHIBIT 7

Consolidated Report of Condition of

THE BANK OF NEW YORK

of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1996, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.

Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 6,024,605
Interest-bearing balances .......... 808,821
Securities:
Held-to-maturity securities ........ 1,071,747
Available-for-sale securities ...... 3,105,207
Federal funds sold in domestic offices
of the bank: ......................... 4,250,941
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................31,962,915
LESS: Allowance for loan and
lease losses ..............635,084
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 31,327,402
Assets held in trading accounts ...... 1,539,612
Premises and fixed assets (including
capitalized leases) ................ 692,317
Other real estate owned .............. 22,123
Investments in unconsolidated
subsidiaries and associated
companies .......................... 213,512
Customers' liability to this bank on
acceptances outstanding ............ 985,297
Intangible assets .................... 590,973
Other assets ......................... 1,487,903
-----------
Total assets ......................... $52,120,460
-----------
-----------

LIABILITIES
Deposits:
In domestic offices ................ $25,929,642
Noninterest-bearing ................ 11,245,050
Interest-bearing ................... 14,684,592
In foreign offices, Edge and
Agreement subsidiaries, and IBFs . 12,852,809
Noninterest-bearing ................ 552,203
Interest-bearing ................... 12,300,606
Federal funds purchased and securities
sold under agreements to repurchase
in domestic offices of the
bank and of its Edge and Agreement
subsidiaries, and in IBFs:
Federal funds purchased ............ 1,360,877
Securities sold under agreements
to repurchase..................... 226,158
Demand notes issued to the U.S.
Treasury ........................... 204,987
Trading liabilities .................. 1,437,445
Other borrowed money:
With original maturity of one year
or less .......................... 2,312,556
With original maturity of more than
one year ......................... 20,766
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,014,717
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,721,291
-----------
Total liabilities .................... 48,095,648
-----------
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,354,095
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 7,030
Cumulative foreign currency transla-
tion adjustments .................. (9,916)
-----------
Total equity capital ................ 4,024,812
-----------
Total liabilities and equity
capital ........................... $52,120,460
-----------
-----------

I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.

Robert E. Keilman

We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to the best
of our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true and correct.

J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )

<PAGE>

BYLAWS

GCI HOLDINGS, INC.

<PAGE>

TABLE OF CONTENTS

ARTICLE I OFFICES............................................................1

ARTICLE III BOARD OF DIRECTORS................................................4
Section 1. GENERAL POWERS................................................4
Section 2. NUMBER, TENURE AND QUALIFICATIONS.............................4
Section 3. REGULAR MEETINGS..............................................5
Section 4. SPECIAL MEETINGS..............................................5
Section 5. QUORUM........................................................5
Section 6. MANNER OF ACTING..............................................5
Section 7. ATTENDANCE AT MEETINGS........................................5
Section 8. VACANCIES.....................................................6
Section 9. COMPENSATION..................................................6
Section 10. PRESUMPTION OF ASSENT........................................6
Section 11. REMOVAL OF DIRECTORS.........................................6
Section 12. RESIGNATION..................................................6
Section 13. VOTING BY INTERESTED DIRECTORS...............................7
Section 14. ACTION BY DIRECTORS WITHOUT A MEETING........................7

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Section 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS................9
Section 10. SALARIES......................................................9

ARTICLE V LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS,
OFFICERS AND AGENTS OF THE CORPORATION..............................9
Section 1. LIMITATION OF LIABILITY.......................................9
Section 2. RIGHT OF INDEMNIFICATION.....................................10
Section 3. RIGHTS CUMULATIVE............................................10

ARTICLE VI CONTRACTS, LOANS, CHECKS, DEPOSITS AND COMPENSATION................11
Section 1. CONTRACTS....................................................11
Section 2. LOANS........................................................11
Section 3. CHECKS, DRAFTS, ETC..........................................11
Section 4. DEPOSITS.....................................................11

ARTICLE VIII TAXABLE YEAR AND ACCOUNTING PERIOD.............................12

ARTICLE IX DIVIDENDS.........................................................12

ARTICLE X CORPORATE SEAL....................................................12

ARTICLE XI WAIVER OF NOTICE..................................................13

ARTICLE XII AMENDMENTS........................................................13

ARTICLE XIV CONDUCT OF MEETINGS..............................................15

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ARTICLE I
OFFICES

The principal office of GCI Holdings, Inc. (the "Corporation") shall be
located in Anchorage, Alaska. The Corporation may have such other offices,
either within or without the State of Alaska, as the Board of Directors may
designate or as the business of the Corporation may require from time to time.

ARTICLE II
SHAREHOLDERS' MEETINGS

(b) The Secretary of the meeting shall be the Secretary of the
Corporation or an Assistant Secretary, or if none of such officers is present,
any person appointed by the Chairman of the meeting.

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Section 10. VOTING OF SHARES BY CERTAIN HOLDERS.

ARTICLE III
BOARD OF DIRECTORS

Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors.

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Section 4. SPECIAL MEETINGS.

Section 6. MANNER OF ACTING. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.

Section 7. ATTENDANCE AT MEETINGS. The Board of Directors may conduct a
meeting of the Board by communicating simultaneously with each other by means of

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If the resignation is effective at a future time, a successor may be elected to
take office when the resignation becomes effective.

ARTICLE IV
OFFICERS

Section 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.

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Section 7. THE SECRETARY. The Secretary shall:

(a) keep the minutes of the proceedings of the Shareholders and of the
Board of Directors in one or more books provided for that purpose;

(b) see that all notices are duly given in accordance with the provisions
of these Bylaws or as required by law;

(d) keep a register of the post office address of each Shareholder which
shall be furnished to the Secretary by such Shareholder;

(e) sign with the President, or a Vice President, certificates for shares
of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;

(f) have general charge of the stock transfer books of the Corporation; and

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(g) in general perform all duties incident to the office of the Secretary
and such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.

Section 8. THE TREASURER. The Treasurer shall:

(a) have charge and custody of and be responsible for all funds and
securities of the Corporation;

ARTICLE V
LIMITATION OF LIABILITY AND
INDEMNIFICATION OF DIRECTORS, OFFICERS
AND AGENTS OF THE CORPORATION

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Bylaws or pursuant to any agreement or resolution of the Board of Directors or
of the Shareholders, or otherwise.

ARTICLE VI
CONTRACTS, LOANS, CHECKS,
DEPOSITS AND COMPENSATION

ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER

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All shares issued by the Corporation shall contain a legend on the
certificates stating substantially the following:

ARTICLE VIII
TAXABLE YEAR AND ACCOUNTING PERIOD

The taxable year and accounting period of the Corporation shall begin on
January 1 and end on December 31, unless changed by resolution of the Board of
Directors.

ARTICLE IX
DIVIDENDS

ARTICLE X
CORPORATE SEAL

ARTICLE XI

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WAIVER OF NOTICE

ARTICLE XII
AMENDMENTS

ARTICLE XIII
EXECUTIVE COMMITTEE

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a meeting of the Executive Committee need not state the business proposed to be
transacted at the meeting.

Section 7. VACANCIES. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.

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ARTICLE XIV
CONDUCT OF MEETINGS

All meetings conducted under these Bylaws shall be governed in accordance
with ROBERTS RULES OF ORDER.

We, the undersigned, hereby certify that the foregoing Bylaws for governing
the operation and management of GCI Holdings, Inc., were duly adopted by the
Directors by unanimous written consent, effective as of ________________, 1997.

-------------------------------------
John M. Lowber, Secretary
APPROVED:

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Ronald A. Duncan, President

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ARTICLES OF INCORPORATION

GCI HOLDINGS, INC.

ARTICLE I - NAME

The name of the corporation ("Corporation") is: GCI HOLDINGS, INC.

ARTICLE II - PURPOSES AND POWERS

ARTICLE III - REGISTERED OFFICE AND AGENT

The address of the Corporation's registered office and the name of its
registered agent is Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., 717 "K"
Street, Anchorage, AK 99501.

ARTICLE IV - CAPITAL

The Corporation shall have the authority to issue ten thousand (10,000)
shares of no par value stock. These shares shall be common voting shares, each
share having one (1) vote.

ARTICLE V - NO PRESUMPTIVE RIGHTS

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ARTICLE VI - NO CUMULATIVE VOTING

Pursuant to AS 10.06.420(d), shareholders shall not cumulate their votes,
but must vote shares held by them for as many persons as there are directors to
be elected.

ARTICLE VII - POWER TO REDEEM SHARES

Pursuant to AS 10.06.325, the Corporation has the power on majority vote of
the shareholders, to redeem, in whole or in part, any class of outstanding
shares.

ARTICLE VIII - QUORUM OF SHAREHOLDERS

A quorum for the conducting of any shareholder business shall be fifty-one
percent (51%) of all outstanding shares that are entitled to vote.

ARTICLE IX - INITIAL DIRECTORS

The initial number of directors of the Corporation shall be five (5). The
names and addresses of the initial directors, who shall serve until the first
annual meeting of shareholders or until their successors are elected and
qualified are as follows:

Ronald A. Duncan
2550 Denali Street, Suite 1000
Anchorage, AK 99503

Larry E. Romrell
4643 S. Ulster, Suite 400
Denver, CO 80237

Donne F. Fisher

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4643 S. Ulster, Suite 400
Denver, CO 80237

Robert M. Walp
2550 Denali Street, Suite 1000
Anchorage, AK 99503

Carter Page
c/o Semaphore Partners
8101 Prentice Plaza
Suite M-200
Englewood, CO 80111

ARTICLE X - ALIEN AFFILIATES

The Corporation is not affiliated with any nonresident alien or a
corporation whose place of incorporation is outside the United States (as
defined in AS 10.06.990(2) and (3)).

ARTICLE XI - LIABILITY OF DIRECTORS

The directors of the Corporation shall not be liable to the Corporation for
monetary damages for a breach of fiduciary duty except for:

(1) A breach of a director's duty of loyalty to the
Corporation;

(2) Acts or omissions not in good faith or that
involve intentional misconduct or a knowing
violation of law; or

(3) A transaction from which the director derives an
improper personal benefit.

ARTICLE XII - BYLAWS

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ARTICLE XIII - DURATION

The duration of the Corporation shall be perpetual.

ARTICLE XIV - EFFECTIVE DATE

These Articles will be effective upon filing.

IN WITNESS WHEREOF, I have signed these Articles this _____ day of May,
1997.

---------------------------------------
Robert B. Flint

IN WITNESS WHEREOF, I have signed these Articles this _____ day of May,
1997.

---------------------------------------
Bonnie J. Paskvan

STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )

ROBERT B. FLINT says on oath or affirms that he has read the foregoing
ARTICLES OF INCORPORATION OF GCI HOLDINGS, INC., and believes all statements
made in the document are true and correct.

---------------------------------------

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Notary Public in and for the State of Alaska
My commission expires:
----------------------
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )

BONNIE J. PASKVAN says on oath or affirms that she has read the foregoing
ARTICLES OF INCORPORATION OF GCI HOLDINGS, INC., and believes all statements
made in the document are true and correct.

--------------------------------------------
Notary Public in and for the State of Alaska
My commission expires:
----------------------

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