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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year endedDecember 31, 2007

 

or

 

oTRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to           

 

Commission File No.0-15279

 

 

GENERAL COMMUNICATION, INC.

 

 

(Exact name of registrant as specified in its charter)

 

 

 

State of Alaska

 

92-0072737

 

 

(State or other jurisdiction of

 

(I.R.S Employer

 

 

incorporation or organization)

 

Identification No.)

 

 

 

 

2550 Denali Street

 

 

 

 

 

Suite 1000

 

 

 

 

 

Anchorage, Alaska

 

99503

 

 

(Address of principal executive offices)

 

(Zip Code)

 

 

 

 

 

 

 

 

 

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

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

Securities registered pursuant to Section 12(g) of the Exchange Act:

 

 

Class A common stock

 

Class B common stock

 

 

(Title of class)

 

(Title of class)

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes oNo x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes oNo x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes xNo o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.              o

 

 

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

 

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o(Do not check if a smaller reporting company)

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes o

No x

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average bid and asked prices of such stock as of the close of trading as of the last business day of the registrant’s most recently completed second fiscal quarter of June 30, 2007 was approximately $389,157,000. Shares of voting stock held by each officer and director and by each person who owns 5% or more of the outstanding voting stock (as publicly reported by such persons pursuant to Section 13 and Section 16 of the Exchange Act) have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

 

The number of shares outstanding of the registrant’s common stock as of February 20, 2008, was:

Class A common stock - 49,913,996 shares; and,

Class B common stock - 3,256,623 shares.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the Registrant’s definitive proxy statement relating to its 2008 Annual Meeting of Shareholders are incorporated by reference in Part III of this Annual Report on Form 10-K where indicated. Alternatively, the Registrant may file an amendment to this Form 10-K to provide such information within 120 days following the end of Registrant’s fiscal year ended December 31, 2007.

 

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GENERAL COMMUNICATION, INC.

2007 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

 

 

Glossary

 

 

 

 

4

 

 

 

 

 

 

Cautionary Statement Regarding Forward-Looking Statements

 

 

 

7

 

 

 

 

 

 

Part I

 

 

 

 

8

 

 

 

 

 

 

 

Item 1. Business

 

 

 

8

 

Item 1A. Risk Factors

 

 

 

39

 

Item 1B. Unresolved Staff Comments

 

 

 

47

 

Item 2. Properties

 

 

 

47

 

Item 3. Legal Proceedings

 

 

 

48

 

Item 4. Submissions of Matters to a Vote of Security Holders

 

 

 

48

 

 

 

 

 

 

Part II

 

 

 

 

48

 

Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

 

 

48

 

Item 6. Selected Financial Data

 

 

 

52

 

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

53

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 

 

 

81

 

Item 8. Consolidated Financial Statements and Supplementary Data

 

 

 

81

 

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

 

 

 

81

 

Item 9A. Controls and Procedures

 

 

 

81

 

Item 9B. Other Information

 

 

 

83

 

 

 

 

 

 

Part III

 

 

 

 

84

 

Item 10. Directors, Executive Officers and Corporate Governance

 

 

 

84

 

Item 11. Executive Compensation

 

 

 

84

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

 

 

84

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

 

 

85

 

Item 14. Principal Accountant Fees and Services

 

 

 

85

 

 

 

 

 

 

Part IV

 

 

 

 

86

 

Item 15. Exhibits, Consolidated Financial Statement Schedules

 

 

 

86

 

 

 

 

 

 

SIGNATURES

 

 

 

145

 

 

 

 

 

 

 

 

 

This Annual Report on Form 10-K is for the year ending December 31, 2007. This Annual Report modifies and supersedes documents filed prior to this Annual Report. The Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information that we file with them, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Annual Report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Annual Report.

 

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Glossary

 

We and our industry use many terms and acronyms that may not be familiar to you. To assist you in reading this document, we have provided below definitions of some of these terms.

 

Alaska DigiTel - An Alaska based wireless communications company of which we acquired an 81.9% equity interest on January 2, 2007.

 

AULP East - An undersea fiber optic cable system connecting Whittier, Valdez and Juneau, Alaska and Seattle, Washington, which was placed into service in February 1999.

 

AULP West - An undersea fiber optic cable system connecting Seward, Alaska to Warrenton, Oregon which was placed into service in June 2004.

 

Basic Service - The basic service tier includes, at a minimum, signals of local television broadcast stations, any public, educational, and governmental programming required by the franchise to be carried on the basic tier, and any additional video programming service added to the basic tier by the cable operator.

 

CDMA -Code Division Multiple Access - A digital wireless phone technology offered under our Alaska DigiTel brand name.

 

CLEC - Competitive Local Exchange Carrier - A company that provides its customers with an alternative to the ILEC for local transport of communications services, as allowed under the 1996 Telecom Act.

 

Collocation - The ability of a competitive access provider or CLEC to connect its network to the LEC’s central offices. Physical collocation occurs when a connecting carrier places its network connection equipment inside the LEC’s central offices. Virtual collocation is an alternative to physical collocation pursuant to which the LEC permits a competitive access provider or CLEC to connect its network to the LEC’s central offices on comparable terms, even though the competitive access provider’s or CLEC’s network connection equipment is not physically located inside the central offices.

 

DAMA - Demand Assigned Multiple Access - Digital satellite earth station technology that allows calls to be made between remote villages using only one satellite hop thereby reducing satellite delay and capacity requirements while improving quality.

 

DBS - Direct Broadcast Satellite - Subscription television service obtained from satellite transmissions using frequency bands that are internationally allocated to the broadcast satellite services. The major providers of DBS are currently The DirecTV Group, Inc. and EchoStar Communications Corporation (marketed as the DISH Network).

 

DLC - Digital Loop Carrier - A digital transmission system designed for subscriber loop plant. Multiplexes a plurality of circuits onto very few wires or onto a single fiber pair.

 

DLPS - Digital Local Phone Service - A term we use referring to our deployment of voice telephone service utilizing our hybrid-fiber coax cable facilities.

 

DSL - Digital Subscriber Line - Technology that allows Internet access and other high-speed data services at data transmission speeds greater than those of modems over conventional telephone lines.

 

DVR - Digital Video Recorder - A service that allows digital cable subscribers to select, record and store programs and play them at whatever time is convenient. DVR service also provides the ability to pause and rewind “live” television.

 

Equal Access - Connection provided by a LEC permitting a customer to be automatically connected to the Interexchange carrier of the customer’s choice when the customer dials “1.” Also refers to a generic concept under which the Bell system operating companies (“BOC”) must provide access services to AT&T’s competitors that are equivalent to those provided to AT&T.

 

ETC - Eligible Telecommunications Carrier - A telephone service provider that has agreed to hold out service to all customers (excluding those who fail to pay for service) in the area for which the carrier is designated as an ETC. In return, the carrier is eligible for state and federal universal service funds.

 

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FCC - Federal Communications Commission - A federal regulatory body empowered to establish and enforce rules and regulations governing public utility companies and others, such as the Company.

 

Frame Relay - A wideband (64 kilobits per second to 1.544 Mbps) packet-based data interface standard that transmits bursts of data over WANs. Frame-relay packets vary in length from 7 to 1024 bytes. Data oriented; it is generally not used for voice or video.

 

GCI - General Communication, Inc. - An Alaska corporation and the Registrant.

 

GSM - Global System for Mobile Communications - A digital wireless phone technology offered under our GCI brand name.

 

HDTV - High-Definition Television - A digital television format delivering theater-quality pictures and CD-quality sound. HDTV offers an increase in picture quality by providing up to 1,920 active horizontal pixels by 1,080 active scanning lines, representing an image resolution of more than two million pixels. In addition to providing improved picture quality with more visible detail, HDTV offers a wide screen format and Dolby® Digital 5.1 surround sound.

 

ILEC - Incumbent Local Exchange Carrier - With respect to an area, the LEC that - (A) on the date of enactment of the Telecommunications Act of 1996, provided telephone exchange service in such area; and (B)(i) on such date of enactment, was deemed to be a member of the exchange carrier association pursuant to section 69.601(b) of the FCC’s regulations (47 C.F.R. 69.601(b)); or (ii) is a person or entity that, on or after such date of enactment, became a successor or assign of a member described in clause (i).

 

Interexchange - Communication between two different local access and transport areas or, in Alaska, between two different Local Exchange serving areas.

 

IP - Internet Protocol - The method or protocol by which data is sent from one computer to another on the Internet. Each computer (known as a host) on the Internet has at least one IP address that uniquely identifies it from all other computers on the Internet.

 

ISDN - Integrated Services Digital Network - A set of standards for transmission of simultaneous voice, data and video information over fewer channels than would otherwise be needed, through the use of out-of-band signaling. The most common ISDN system provides one data and two voice circuits over a traditional copper wire pair, but can represent as many as 30 channels. Broadband ISDN extends the ISDN capabilities to services in the Gigabit per second range.

 

ISP - Internet Service Provider - A company providing retail and/or wholesale Internet services.

 

LAN - Local Area Network - The interconnection of computers for sharing files, programs and various devices such as printers and high-speed modems. LANs may include dedicated computers or file servers that provide a centralized source of shared files and programs.

 

LEC - Local Exchange Carrier - A company providing local telephone access services. Each BOC is a LEC.

 

LMDS - Local Multipoint Distribution System - LMDS uses microwave signals (millimeter wave signals) in the 28 GHz spectrum to transmit voice, video, and data signals within small cells 3-10 miles in diameter. LMDS allows license holders to control up to 1.3 GHz of wireless spectrum in the 28 GHz Ka-band. The 1.3 GHz can be used to carry digital data at speeds in excess of one gigabit per second. The extremely high frequency used and the need for point to multipoint transmissions limits the distance that a receiver can be from a transmitter. This means that LMDS will be a “cellular” technology, based on multiple, contiguous, or overlapping cells. LMDS is expected to provide customers with multichannel video programming, telephony, video communications, and two-way data services. ILECs and cable companies may not obtain the in-region 1150 MHz license for three years following the date of the license grant. Within 10 years following the date of the license grant, licensees will be required to provide ‘substantial service’ in their service regions.

 

Local Exchange - A geographic area generally determined by a state regulatory body, in which calls generally are transmitted without toll charges to the calling or called party.

 

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Local Number Portability - The ability of an end user to change local or wireless service providers while retaining the same telephone number.

 

Lower 48 States or Lower 48 - Refers to the 48 contiguous states south of or below Alaska.

 

Lower 49 States or Lower 49 - Refers to Hawaii and the Lower 48 States.

 

MAN - Metropolitan Area Network - LANs interconnected within roughly a 50-mile radius. MANs typically use fiber optic cable to connect various wire LANs. Transmission speeds may vary from 2 to 100 Mbps.

 

Mat-Su Valley - The Matanuska and Susitna valleys are located in south-central Alaska, to the north of Anchorage, and include the communities of Palmer and Wasilla and the immediately surrounding areas.

 

PCS - Personal Communication Services - PCS encompasses a range of advanced wireless mobile technologies and services. It promises to permit communications to anyone, anywhere and anytime while on the move. The Cellular Telecommunications Industry Association defines PCS as a “wide range of wireless mobile technologies, chiefly cellular, paging, cordless, voice, personal communications networks, mobile data, wireless private branch exchange, specialized mobile radio, and satellite-based systems.” The Federal Communications Commission defines PCS as a “family of mobile or portable radio communications services that encompasses mobile and ancillary fixed communications services to individuals and businesses and can be integrated with a variety of competing networks.”

 

Private Line - Uses dedicated circuits to connect customer’s equipment at both ends of the line. Does not provide any switching capability (unless supported by customer premise equipment). Usually includes two local loops and an Interexchange carrier circuit.

 

Private Network - A communications network with restricted (controlled) access usually made up of Private Lines (with some private branch exchange switching).

 

RCA - Regulatory Commission of Alaska - A state regulatory body empowered to establish and enforce rules and regulations governing public utility companies and others, such as the Company, within the State of Alaska (sometimes referred to as Public Service Commissions, or PSCs, or Public Utility Commissions, or PUCs).

 

SchoolAccess 

SDN - Software Defined Network - A switched long-distance service for very large users with multiple locations. Instead of putting together their own network, large users can get special usage rates for calls carried on regular switched long-distance lines.

 

SMATV - Satellite Master Antenna Television - (Also known as “private cable systems”) are multichannel video programming distribution systems that serve residential, multiple-dwelling units, and various other buildings and complexes. A SMATV system typically offers the same type of programming as a cable system, and the operation of a SMATV system largely resembles that of a cable system - a satellite dish receives the programming signals, equipment processes the signals, and wires distribute the programming to individual dwelling units. The primary difference between the two is that a SMATV system typically is an unfranchised, stand-alone system that serves a single building or complex, or a small number of buildings or complexes in relatively close proximity to each other.

 

SONET - Synchronous Optical Network - A 1984 standard for optical fiber transmission on the public network. 51.84 Mbps to 9.95 Gigabits per second, effective for ISDN services including asynchronous transfer mode.

 

T-1 - A data communications circuit capable of transmitting data at 1.5 Mbps.

 

TCP/IP - Transmission Control Protocol/Internet Protocol - A suite of network protocols that allows computers with different architectures and operating system software to communicate with other computers on the Internet.

 

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UNE - Unbundled Network Element - A discrete component of a telephone network. Unbundled network elements are the basic network functions, i.e., the components needed to provide a full range of communications services. They are physical facilities as well as all the features and capabilities provided by those facilities.

 

VoIP - Voice over Internet Protocol - Technology that allows voice telephone service over broadband Internet connections via digital packets rather than traditional protocols.

 

VSAT - Very Small Aperture Terminal - A small, sometimes portable satellite terminal that allows connection via a satellite link.

 

WAN - Wide Area Network - A remote computer communications system. WANs allow file sharing among geographically distributed workgroups (typically at higher cost and slower speed than LANs or MANs). WANs typically use common carriers’ circuits and networks. WANs may serve as a customized communication backbone that interconnects all of an organization’s local networks with communications trunks that are designed to be appropriate for anticipated communication rates and volumes between nodes.

 

1992 Cable Act - The Cable Television Consumer Protection and Competition Act of 1992.

 

1996 Telecom Act - The Telecommunications Act of 1996 - The 1996 Telecom Act was signed into law February 8, 1996. Under its provisions, BOCs were allowed to immediately begin manufacturing, research and development; GTE Corp. could begin providing Interexchange services through its telephone companies nationwide; laws in 27 states that foreclosed competition were pre empted; co-carrier status for CLECs was ratified; and the physical collocation of competitors’ facilities in LECs central offices was allowed.

 

The purpose of the 1996 Telecom Act was to move from a regulated monopoly model of telecommunications to a deregulatory competitive markets model. The act eliminated the old barriers that prevented three groups of companies, the LECs, including the BOCs, the long-distance carriers, and the cable TV operators, from competing head-to-head with each other. The act requires LECs to let new competitors into their business. It also requires the LECs to open up their networks to ensure that new market entrants have a fair chance of competing. The bulk of the act is devoted to establishing the terms under which the LECs must open up their networks.

 

The 1996 Telecom Act substantially changed the competitive and regulatory environment for telecommunications providers by significantly amending the Communications Act of 1934 including certain of the rate regulation provisions previously imposed by the Cable Television Consumer Protection and Competition Act of 1992 (the “1992 Cable Act”). The 1996 Telecom Act eliminated rate regulation of the cable programming service tier in 1999. Further, the regulatory environment will continue to change pending, among other things, the outcome of legal challenges, legislative activity, and FCC rulemaking and enforcement activity in respect of the 1992 Cable Act and the completion of a significant number of continuing FCC rulemakings under the 1996 Telecom Act.

 

Cautionary Statement Regarding Forward-Looking Statements

 

You should carefully review the information contained in this Annual Report, but should particularly consider any risk factors that we set forth in this Annual Report and in other reports or documents that we file from time to time with the SEC. In this Annual Report, in addition to historical information, we state our future strategies, plans, objectives or goals and our beliefs of future events and of our future operating results, financial position and cash flows. In some cases, you can identify those so-called “forward-looking statements” by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “project,” or “continue” or the negative of those words and other comparable words. All forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, achievements, plans and objectives to differ materially from any future results, performance, achievements, plans and objectives expressed or implied by these forward-looking statements. In evaluating those statements, you should specifically consider various factors, including those identified under “Risk Factors,” and elsewhere in this Annual Report. Those factors may cause our actual results to differ materially from any of our forward-looking statements. For these statements, we claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.

 

You should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement, and such risks, uncertainties and other factors speak only as of the date on which they were originally made and we

 

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expressly disclaim any obligation or undertaking to update or revise any forward-looking statement to reflect any change in our expectations with regard to those statements or any other change in events, conditions or circumstances on which any such statement is based. New factors emerge from time to time, and it is not possible for us to predict what factors will arise or when. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

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