November 21, 2002

David Morris, (907) 265-5396; dmorris@gci.com

FOR IMMEDIATE RELEASE

GCI FILES TO LOWER ACS RATES

Company Contends ACS is Overly Compensated for Leased Facilities

ANCHORAGE, AK -- GCI announced today that it has filed a petition with the Regulatory Commission of Alaska (RCA) seeking to lower the rates it pays Alaska Communications Systems (ACS) to lease facilities used for local telephone competition in Anchorage. The filing also seeks a decrease in the rates GCI pays ACS to switch and transport calls within the ACS network.

The filing is supported by a review of ACS' finances that indicates ACS is cash flush from local services, but paid approximately $250 million too much to acquire telephone properties in the late 1990s. Moreover, ACS continues to lose money in unregulated enterprises such as wireless TV and Internet.

"This filing attacks directly ACS' absurd contention that it must continually raise rates because it is unfairly compensated," said Dana Tindall, GCI senior vice president of legal and regulatory affairs. "Not only is ACS fairly compensated, it is overly compensated. This filing seeks to adjust this imbalance in order to deter barriers to entry that will discourage competition."

According to Tindall, the terms of the 1996 Telecommunication Act require an incumbent telephone company like ACS to lease portions of its network to competitive providers. The goal of this policy is to foster competition in a monopoly market so consumers can receive the benefits of competition such as customer choice, lower prices and better services.

The price to lease portions of the network is determined by the state regulatory commission subject to input from both incumbent and competitive telephone providers. In Anchorage, the price for unbundled network elements (UNEs)-the copper line that extends to a home or business-was originally set at $13.85 but was raised in 2001 to $14.92 at the request of ACS based on costs that it said it incurred. ACS is currently seeking to raise the rate an additional 64 percent to $24.48.

After reviewing the evidence provided by ACS, GCI analysts determined that the rate should be lowered to the previous rate of $13.85 and should be further reviewed to bring the rates down to as low as $10.88. GCI analysts also performed an analysis on the rate it compensates ACS for telephone switching and local transport. The analysts found that GCI compensates ACS at a rate three times higher than it should. GCI seeks to lower these rates from $0.006 per minute to approximately $0.002 per minute.

"ACS has said that it is unwilling to invest in its local telephone network because it doesn't receive enough compensation to lease its facilities," added Tindall. "That is simply not true. An analysis of ACS' finances shows that its local telephone business is robust and brimming with cash."

Tindall said the analysis of ACS' finances was performed by Snavely, King, Majoros, O'Connor & Lee, Inc., an economic and regulatory consulting firm based in Washington D.C. The study indicates that ACS' local telephone and directory services generates considerable cash, with its non-regulated lines of businesses draining cash from the parent company. In addition, the report says that ACS acquired telephone properties in Alaska during the late 1990s for a total net purchase price of $677 million which included $257 million in "goodwill," representing the excess of the purchase price over the net book value. In early 2002, because of an accounting change, ACS was required to write off $105.4 million in goodwill. This left much of its balance sheet heavily leveraged by debt.

The authors summarize the findings by saying, "ACS is a classic case of a leveraged buyout gone bad."

According to Tindall, the analysis suggests that ACS' stated unwillingness to invest in the local telephone network because of low UNE pricing is politically motivated, and not factually based. "ACS wants to raise rates in regulated businesses like local telephone in order to subsidize its losses in non-regulated businesses like enterprise service, wireless TV and Internet. ACS wants to be rewarded for its mis-steps, and in so doing, punish customers and competitors alike. Clearly, ACS is able to fulfill its certificated requirements, however, it is becoming increasingly apparent that it is unwilling to do so," Tindall added.

The RCA is reviewing GCI's filing in consideration of ACS' request to increase rates in Docket number U-96-89.

GCI (Nasdaq:GNCMA) provides local, wireless, and long distance telephone, cable television, Internet and data communication services in Alaska. More information about the company can be found at www.gci.com.