Alaska Communications Systems Group, Inc.
600 Telephone Avenue
Anchorage, Alaska 99503

Notice of Annual Meeting of Shareholders
to be Held June 10, 2011

     You are cordially invited to attend the 2011 Annual Meeting of Shareholders of Alaska Communications Systems Group, Inc., to be held at our corporate headquarters at 600 Telephone Avenue, 4^th floor, Anchorage, Alaska 99503, on Friday, June 10, 2011 at 9:00 a.m. Alaska time, for the following purposes:

	1.		To elect eight directors;
	2.		To approve the Alaska Communications Systems Group, Inc. 2011 Incentive Award Plan;
	3.		To hold an advisory vote on executive compensation;
	4.		To hold an advisory vote on the frequency of future advisory votes on executive compensation;
	5.		To ratify the appointment of KPMG LLP as the company’s independent auditors for the year ending December 31, 2011; and
	6.		To transact any other business that may properly come before the 2010 Annual Meeting or any adjournment thereof.

     These matters are described in more detail in the accompanying proxy statement. In addition, financial and other information about Alaska Communications Systems Group, Inc. is contained in the accompanying Annual Report on Form 10-K for the year ended December 31, 2010. We encourage you to read the proxy statement and the other information carefully.

     Only shareholders of record at the close of business on April 21, 2011 will be entitled to vote at the annual meeting including any adjournment or adjourned meeting held thereafter. During the ten days prior to the annual meeting, a list of such shareholders will be available for inspection at the executive offices at the address set forth above.

     Whether or not you plan to attend the meeting, please promptly complete and return the accompanying proxy (or follow the instructions set forth in the accompanying proxy to vote by telephone or the Internet). Returning your proxy as described above does not deprive you of your right to attend the meeting and to vote your shares in person. Please refer to the section under the heading “Voting Your Proxy” on page 1 of our proxy statement for more information on how to vote your shares by proxy or in person.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on June 10, 2011:

The 2010 Annual Report and Proxy Statement of Alaska Communications Systems Group, Inc. are available at www.proxydocs.com/alsk or via our investor relations website at www.alsk.com.

Anchorage, Alaska
April 29, 2011

Please mark, sign and date the accompanying proxy and return it promptly.

The proxy is revocable at any time prior to its use.

Table of Contents

Information about the Annual Meeting of Shareholders Date, Time and Place of Meeting			1
Executive Summary			4
Performance Metrics and Graph			5
Security Ownership of Certain Beneficial Owners			6
Security Ownership of Directors and Executive Officers			6
Proposal 1: Election of Directors			7
Risk Oversight			16
Director Compensation			17
Compensation Discussion and Analysis			19
Compensation and Personnel Committee Interlocks and Insider Participation			33
Compensation Tables			34
Employment Arrangements and Potential Payments upon Termination or Change in Control			38
Proposal 2: Adoption of the Alaska Communications Systems Group, Inc. 2011 Incentive Award Plan			44
Proposal 3: Advisory Vote on Executive Compensation			52
Proposal 4: Advisory Vote on Frequency of Future Executive Compensation Advisory Votes			54
Proposal 5: Ratification of Selection of Independent Registered Public Accounting Firm			54
Audit Fees			55
Audit Committee Report			55
Proposal 6: Other Business Matters			56
Annual Report on Form 10-K			56
Shareholder Proposals and Communications with the Board of Directors			56
Directions to the Annual Meeting			57

PROXY STATEMENT

Alaska Communications Systems Group, Inc.

600 Telephone Avenue
Anchorage, Alaska 99503

Annual Meeting of Shareholders
to be Held June 10, 2011

Information about the Annual Meeting of Shareholders

     The annual meeting will be held on Friday, June 10, 2011, beginning at 9:00 a.m. local time in the 4th floor conference room of our executive offices located at 600 Telephone Avenue, Anchorage, Alaska 99503.

      Items of Business

	1.		The election of eight directors;
	2.		A resolution to approve the Alaska Communications Systems Group, Inc. 2011 Incentive Award Plan;
	3.		An advisory vote on executive compensation;
	4.		An advisory vote on the frequency of future advisory votes on executive compensation;
	5.		The ratification of the appointment of KPMG LLP as the company’s independent auditors for the year ending December 31, 2011; and
	6.		Other business that may properly come before the meeting or any adjournment thereof.

     About this Proxy Statement

     Our Board of Directors (the “Board”) has made this proxy statement available to you to solicit your vote at the annual meeting including any adjournment or adjourned meeting held thereafter. This proxy statement contains summarized information required to be provided to shareholders under rules promulgated by the Securities and Exchange Commission (“SEC”) and is designed to assist shareholders in voting their shares. On or about April 29, 2011, we will begin mailing a notice of Internet availability of proxy materials, or the proxy materials, to all shareholders of record at the close of business on April 21, 2011 (the “Record Date”).

     Voting

     Only shareholders of record as of the close of business on the Record Date will be entitled to vote their shares at the annual meeting or any adjournment thereof. Each share is entitled to one vote at the meeting. At the close of business on the Record Date, there were 45,168,592 outstanding shares of our common stock.

     Voting Your Proxy

     If you received a Notice of Internet Availability of Proxy Materials by mail, you may vote your shares by proxy at the Internet site address listed on your notice. You may also request a free paper copy of the proxy materials by

visiting the Internet site address listed on your notice, by calling the listed telephone number, or by sending an e-mail to the e-mail address listed on your notice.

     If your shares are held through a broker, bank or other nominee (held in street name), you will receive instructions from them that you must follow in order to have your shares voted. If you want to vote in person at the annual meeting, you must obtain a valid legal proxy from your broker, bank or other nominee and bring it to the meeting.

     If you hold your shares in your own name as a holder of record with our transfer agent, BNY Mellon, you may instruct the proxies how to vote by following the instructions listed on the Notice of Internet Availability of Proxy Materials and the proxy card, or by signing, dating and mailing the proxy card in the postage paid envelope. Of course, you can always come to the meeting and vote your shares in person.

     Whichever method you select to transmit your instructions, the named proxies will vote your shares in accordance with those instructions. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board of Directors:

	•		FOR all of the nominees for director;
	•		FOR the adoption of the Alaska Communications Systems Group, Inc. 2011 Incentive Award Plan;
	•		FOR the advisory vote on executive compensation;
	•		EVERY YEAR for the advisory vote on the frequency of future advisory votes on executive compensation;
	•		FOR ratification of the appointment of KPMG as the company’s independent auditors for 2011; and
	•		AT THE DISCRETION OF YOUR PROXIES on any other matter that may be properly brought before the annual meeting.

     Revocation of Proxy

     You may revoke your proxy before it is voted at the meeting by:

	•		filing a written notice of revocation dated after the proxy date with Alaska Communications Systems Group, Inc. (“Alaska Communications” or the “Company”); and either
	•		submitting to Alaska Communications a duly executed proxy for the same shares of common stock bearing a later date than the original proxy; or
	•		attending the annual meeting and voting in person at the meeting.

     Attendance at the meeting will not, in and of itself, constitute revocation of a proxy. All written notices of revocation and other communications regarding the revocation of proxies should be addressed as follows: Alaska Communications Systems Group, Inc., Attention: Leonard Steinberg, Vice President, General Counsel and Corporate Secretary, 600 Telephone Avenue MS65, Anchorage, Alaska 99503.

     Heidi L. Thomerson, an employee of the Company designated by the Corporate Secretary, will act as Inspector of Elections, and Mediant Communications, LLC will act as tabulator of the votes for bank, broker and other shareholder of record proxies.

     Quorum

     Holders of a majority of the outstanding shares of common stock entitled to vote generally in the election of directors must be present at the meeting, in person or by proxy, for a quorum to be present. If a quorum is not present, the Chair of the Board of Directors or a majority in interest of the shareholders present and entitled to vote may adjourn the meeting.

     Shares present either by proxy or in person that reflect abstentions or broker non-votes will be counted toward a quorum. Broker “non-votes” occur when a nominee (such as a bank or broker) returns a proxy, but does not have the authority to vote on a particular proposal because it has not received voting instructions from the beneficial owner. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes or abstentions are not considered votes cast on that proposal. Thus, broker non-votes and abstentions will not affect the outcome of any matter being voted on at the meeting except to change the absolute number, but not the percentage, required for approval of a matter.

     Votes Necessary for Approval of Proposals

		Proposal 1:		Election of Directors — Uncontested election of each director is decided by a majority of the votes cast. Therefore, each of the eight persons nominated for director must receive an affirmative vote from a majority of the shares of common stock that are present in person or by proxy and are voting on that director.
		Proposal 2:		Approval of the Alaska Communications Systems Group, Inc 2011 Incentive Award Plan — For this a proposal to be approved, it must receive an affirmative vote from a majority of the shares of common stock that are present in person or by proxy and are voting on the proposal.
		Proposal 3:		Advisory vote on executive compensation — For this advisory vote to be approved, it must receive an affirmative vote from a majority of the shares of common stock that are present in person or by proxy and are voting on the proposal.
		Proposal 4:		Advisory vote on the frequency of the advisory vote on executive compensation — Matters in which there are more than two options are decided by a plurality of the votes cast. Therefore, the option that is selected by a plurality of the shares of common stock that are present in person or by proxy and are voting on the proposal will be the one considered to be recommended by our shareholders for purposes of this advisory vote.
		Proposal 5:		Ratification of Independent Auditors — For this proposal to be approved, it must receive an affirmative vote from a majority of the shares of common stock that are present in person or by proxy and are voting on the proposal.

     Costs of Proxies

     In addition to mailing a Notice of Internet Availability of Proxy Materials or this proxy statement to you, we may also make additional solicitations by telephone, facsimile or other forms of communication. Alaska Communications will bear the cost of soliciting these proxies.

Executive Summary

     This Proxy Statement provides information concerning the Company’s performance and total return to shareholders, the identity and qualifications of the Company’s directors and executive officers, their compensation, and the proposals that you, our shareholders, are being asked to vote on. Highlights include:

	•		Company performance data demonstrating that, year over year, Alaska Communications has outperformed key benchmark stock indices, including the Nasdaq Telecommunications Index, every year (and cumulatively) for the past five years.
	•		Our Board of Directors continues to take steps to strengthen an already robust corporate governance structure and executive compensation program to further protect our shareholders’ interests. Among other recent changes, we have:

	•		Implemented complete separation of the Board Chair and Chief Executive Officer (“CEO”) functions, with the appointment of Mr. Vadapalli as our new President and CEO and the election of Mr. Hayes an independent director since 2006 (as defined by the SEC and in the Nasdaq definitions (“Independent Director”)and previous Chair of the Company’s Audit Committee, as the new Board Chair in 2011.
	•		Utilized the services of an independent compensation consultant, including compiling relevant peer data, to make favorable changes to our executive compensation program that include: (i) paying base salaries below the median of our peer group; (ii) converting two-thirds of annual equity awards to performance stock units that only vest in increments upon achievement of Company performance targets over the succeeding three years; and (iii) retaining only one-third of annual stock unit awards as time vesting over a three year period to encourage retention of key Company leaders.
	•		Since 2009, successfully reduced our annual rate of equity incentive awards to named executive officers (“NEOs”) in keeping with our Compensation and Personnel Committee’s (“C&PC”) 2009 commitment in that regard; and
	•		Adopted many “best practices” in our compensation programs, eliminating or avoiding compensation practices that may be viewed as problematic, and adopting robust “clawback” provisions and other limitations on change-in-control severance provisions for our executives.

	•		Pay follows performance at Alaska Communications. We set quantitatively measurable, annual Company performance goals, rigorously measure our results based on audited financial statements, and pay our executives accordingly.
	•		The Board is proposing for shareholder approval this year the Alaska Communications Systems Group, Inc. 2011 Incentive Award Plan (the “2011 Plan” or “2011 Incentive Award Plan”) that transfers all remaining available shares from our 1999 employee and non-employee director stock incentive plans to the new 2011 Plan, but which does not request the authorization of any additional shares for the new 2011 plan. The 2011 Plan will update and eliminate undesirable provisions in our existing plans (such as stock award vesting based on a single trigger in the event of a change-in-control) and replace them with provisions we believe are more in line with current “best practices” in equity compensation.
	•		Finally, in this proxy statement we are for the first time providing the opportunity for our shareholders to participate in two advisory votes on compensation, including: (i) a vote on our executive compensation program; and (ii) a vote on the frequency of future shareholder advisory votes on our executive compensation program.

Performance Metrics and Graph

     In keeping with our goal of maximizing long-term shareholder value, Alaska Communications has delivered consistently higher total returns to our shareholders than the Standard and Poor’s Corporation Composite 500 Index (the “S&P 500 Index”) and the Nasdaq Telecommunications Index, year over year, throughout the entire five-year period from 2005 to 2010. As the line graph below shows, for the five-year period from 2005 through 2010, our Company provided shareholders with a total shareholder return (“TSR”) of 63.85%, assuming reinvestment of dividends throughout the period. This compares favorably to an S&P 500 Index TSR of 11.96% over the same five-year period and a five-year TSR of 30.09% for the Nasdaq Telecommunications Index. For the 2010 one-year performance period reported in this proxy statement, our Company’s annual TSR was 52.39%, our largest year-over-year TSR during the five-year period. This compares to a benchmark S&P 500 Index TSR of 15.05% and a Nasdaq Telecommunications Index TSR of 29.11% for the same one-year period.

     The line graph below illustrates these performance metrics graphically. Our TSR performance is shown on the top line of the graph. The graph compares the cumulative TSR on our common stock from December 31, 2005 through December 31, 2010 with the cumulative total return of the S&P 500, and the cumulative total return of the Nasdaq Telecommunications Index. The graph assumes an initial investment of $100 in our common stock and in each of the S&P 500, and Nasdaq Telecommunications indices on January 1, 2005, and assumes that dividends, if any, were reinvested.

						2005				2006				2007				2008				2009				2010
Alaska Communications Systems Group		Cum				$	100.00				159.71				167.18				112.92				107.52				163.85
S&P 500 Index — Total Returns		Cum				$	100.00				115.81				122.17				76.96				97.31				111.96
NASDAQ Telecommunications Index		Cum				$	100.00				131.51				116.95				67.19				100.76				130.09

Security Ownership of Certain Beneficial Owners

     The following table provides information about beneficial owners of more than five percent (5%) of the Company’s common stock outstanding as of April 1, 2011.

		Amount and nature
		of beneficial				Percent of
		ownership				class
BlackRock, Inc. 40 East 52nd Street			3,363,281	(1)			7.45	%
New York, New York 10022
Prudential Financial, Inc. 751 Broad Street			2,600,288	(2)			5.76	%
Newark, New Jersey 07102
The Vanguard Group, Inc. 100 Vanguard Blvd.			2,287,750	(3)			5.07	%
Malvern, PA 19355

Security Ownership of Directors and Executive Officers

     The following table sets forth the number of shares of the Company’s common stock beneficially owned as of April 1, 2011 by:

	•		each current director;
	•		each executive officer named in the Summary Compensation Table; and
	•		all of the directors and executive officers as a group.

     Beneficial ownership is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the “Exchange Act”). Each person has sole voting and investment power with respect to the shares indicated except as otherwise stated in the footnotes to the table.

										Other				Acquirable
						Shares				beneficial				within 60								Percent of
				Name of beneficial owner		owned				ownership				days				Total				class
Directors:
				Anand Vadapalli			90,313				—				36,246				126,559				*
				Liane Pelletier			320,217				—				26,026	(1)			346,243				*
				Brian Rogers			11,988				—				45,834				57,822				*
				Gary R. Donahee			—				—				18,380				18,380				*
				Edward (Ned) J. Hayes, Jr.			21,113				—				—				21,113				*
				Annette Jacobs			20,287				—				—				20,287				*
				Peter D. Ley			31,340				—				750				32,090				*
				John Niles Wanamaker			666				—				—				666				*
				David W. Karp			—				—				132				132				*
Officers:
				David Wilson			151,761				—				—				151,761				*
				Leonard Steinberg			113,196				—				4,166				117,362				*
				Foster C. Williams			3,222				—				—				3,222				*
				Total directors & executive officers as a group (14 persons)			773,159				—				131,534				904,693				2.00	%

Proposal 1: Election of Directors

     All of our incumbent directors are standing for election with the exception of Ms. Pelletier. The nominees for director are: Anand Vadapalli, Brian D. Rogers, Gary R. Donahee, Edward (Ned) J. Hayes, Jr., Annette Jacobs, Peter D. Ley, John Niles Wanamaker and David W. Karp. The table below contains certain biographical information about each of the director nominees and the executive officers of the Company. The nominated directors have consented to serve, if elected, until his or her successor is elected at a subsequent meeting of shareholders, but should any nominee be unavailable to serve at the time of the annual meeting, each shareholder’s proxy will vote for the substitute nominee recommended by the Board of Directors.

     Vote Required. The Company’s By-laws require directors to be elected by a majority of the votes cast. Any incumbent that fails to receive a majority of the votes cast is required to submit a resignation that will be considered by the Board and accepted absent a compelling reason for the director to remain on the Board.

The Board of Directors recommends that you vote FOR each of the persons nominated for director in Proposal 1.

     Nominees for Director

     The table below sets forth certain information as of April 1, 2011, about those persons who have been nominated to serve as directors until the annual meeting of shareholders in 2012. All of the nominees, with the exception of Mr. Vadapalli, qualify as Independent Directors in accordance with the SEC and Nasdaq definitions for independence and the standards established in our Corporate Governance Principles.

Name		Age		Position		Since
Anand Vadapalli		45		President and Chief Executive Officer		2011
Brian D. Rogers		60		Director		2001
Gary R. Donahee		64		Director		2005
Edward (Ned) J. Hayes, Jr.		55		Director		2006
Annette Jacobs		53		Lead Independent Director		2006
Peter Ley		51		Director		2008
John Niles Wanamaker		42		Director		2011
David W. Karp		44		Director		2011

     Nominated Directors and Their Business Experience

     Anand Vadapalli. The Board of Directors approved the appointment of Mr. Vadapalli as President and CEO, effective February 1, 2011. Mr. Vadapalli also joined the Board of Directors effective as of that date. Prior to that, Mr. Vadapalli served as Executive Vice President and Chief Operations Officer (“COO”) of the Company beginning October 26, 2009, with operational responsibility for all facets of our business, including network operations, technology, sales and service. Mr. Vadapalli served as our Executive Vice President, Operations and Technology, from December 2008 until October 2009 and previously was our Senior Vice President, Network & Information Technology beginning in August 2006, when he joined the Company. Before joining us, Mr. Vadapalli had most recently served as Vice President of Information Technology at Valor Telecom since February 2004. Prior to Valor, from January 2003 to February 2004, he served as Executive Vice President and Chief Information Officer at Network Telephone Corporation, and from January 1996 through January 2003, he served in various positions at Broadwing / Cincinnati Bell, including as Vice President, Information Technology. Mr. Vadapalli holds a B.E. in Mechanical Engineering from Osmania University in Hyderabad, India as well as a P.G.D.M. from the Indian Institute of Management in Calcutta, India. He currently serves as a member of the Board of the Anchorage Economic Development Corporation.

     Brian D. Rogers, a director since February 2001, is currently the Chancellor at the University of Alaska Fairbanks, where he has served since July 2008. He was previously Principal Consultant and Chief Financial Officer (“CFO”) for Information Insights, Inc., a management and public policy consulting firm. Mr. Rogers served as Vice President of Finance for the University of Alaska Statewide System from 1988 to 1995. Mr. Rogers is a former state legislator who served in the Alaska State House of Representatives from 1979 to 1982. He chaired the State of Alaska Long-Range Planning Commission during 1995 and 1996, and from 1999 through 2007, as a Regent of the University of Alaska: he served as the Board Chair and a member of all committees, including the University’s Finance and Audit Committee. He holds a Masters in Public Administration degree from the Kennedy School of Government, Harvard University, in Massachusetts.

     Gary R. Donahee, a director since February 2005, has over 30 years of telecommunications industry experience and spent 16 years, before retiring in 2003, in senior management positions around the world at Nortel Networks, most recently as Executive Vice President and President of the Americas from 1999 to 2003. He served as Senior Vice President and President, Carrier Networks for Nortel for Europe, the Middle East and Africa and in a similar capacity for the Caribbean and Latin America region. Mr. Donahee also served as Senior Vice President, Corporate Human Resources for Nortel from 1989 to 1993 and was responsible for 60,000 employees in 42 countries. In addition to Nortel Networks, he has held senior executive positions in human resources at Northern Telecom and Bell-Northern Research Corporation. He presently serves on the boards of Vantrix and Tech Radium. Mr. Donahee holds a Bachelor of Physical Education from the University of New Brunswick where he recently served on the Board of Governors. In addition, he has conducted graduate work at The University of Western Ontario and Stanford University in California.

     Edward (Ned) J. Hayes, Jr., a director since February 2006, is CFO of Pillar Data Systems. Pillar’s mission is to design and build the most cost-effective, highly available networked storage solutions in the market. Prior to joining Pillar, Mr. Hayes served as Executive Vice President and CFO of Quantum Corporation (NYSE:

QTM), a global leader in data back-up, recovery and archive storage. He joined Quantum in July 2004, after serving as President and CEO of DirecTV Broadband, Inc. Prior to DirecTV Broadband, Mr. Hayes served as Executive Vice President and CFO at Telocity, Inc., and Financial Vice President and CFO in two of Lucent Technologies’ divisions, including the $20 billion Global Service Provider Business. He has also held senior financial management positions at other multinational companies such as Unisys Corporation (NYSE: UIS), Asea Brown Boveri (ABB), and Credit Suisse First Boston. He has previously served as an independent director and Chair of the Audit Committee of New Wave Research, Inc. and as an independent director of and Chair of the Audit Committee of NPTest, Inc. Mr. Hayes currently serves on the board of Super Micro Computer, Inc. (NASD: SMCI) as an independent director and Chair of the Audit Committee. Mr. Hayes conducted his graduate studies in Accounting and Finance at New York University’s Stern Graduate School of Business and received his undergraduate degree from Colgate University in New York.

     Annette Jacobs, a director since July 2006 and Lead Independent Director since March 2007, is the area president for the west region of Leap Wireless/Cricket Communications, Inc. (“Cricket”) Prior to joining Cricket, Ms. Jacobs was the President and CEO of Door to Door Storage Inc. and Chair and CEO of SafeHarbor Technology Corporation. Ms. Jacobs has over 25 years of experience in the telecommunications and wireless industries, in which she held executive leadership positions at Qwest Communications, Inc. (NYSE: Q), including Executive Vice President — President, Consumer Markets and Executive Vice President — President, Wireless Markets; Verizon Wireless’ (NYSE: VZ) President, Great Lakes Area and various executive leadership positions, across the U.S., with GTE Wireless and Contel Cellular. Ms. Jacobs currently is the chapter president for the National Association of Corporate Directors-Northwest (NACD) and the co-chair for the Seattle chapter of Women Corporate Directors (WCD). She is a former adjunct professor at Seattle University Albers School of Business and Economics. Ms. Jacobs holds a B.A. in Business Management, cum laude, from Jacksonville University in Jacksonville, Florida.

     Peter D. Ley, a Director since August 2008, is the CFO of Connexion Technologies. Connexion is a leading builder and operator of residential fiber-optic video, voice, and data networks for gated communities and high-rise towers. Connexion is headquartered in Cary, North Carolina and has operations across the United States. Mr. Ley has many years of finance and communications experience. Prior to joining Connexion in November 2007, Mr. Ley served for seven years as a managing director at Bank of America Securities, responsible for managing client relationships with the U.S. telecommunications industry. Prior to joining Bank of America, he served as CFO of Pennsylvania-based Commonwealth Telephone Enterprises Inc. Mr. Ley has also served as an investment banker at Dominick & Dominick, Furman Selz, Robert Fleming, Morgan Grenfell and Salomon Brothers. Mr. Ley holds an M.B.A. from Harvard University in Massachusetts and a B.A. from Dartmouth College in New Hampshire.

     John Niles Wanamaker, a director since January 2011, serves as Vice Chairman of Venture Ad Astra, a company focusing on geointelligence, location and imaging technologies; and is also Vice-Chairman of Zulutime, a company with breakthrough position, navigation and timing technologies for wireless networks and innovative indoor location-based services. In addition, he conducts an active angel investment practice under the name of Alaska Venture Partners investing in companies both in and out of Alaska. Mr. Wanamaker has served as either founder or CEO of companies from a wide range of industries, including early stage capital, wireless communication, aerospace launch vehicles, electronic monitored security, and real estate development. His focus has been on the creation of value and the monetization of that value. Active in his community, Mr. Wanamaker donates his time to a number of organizations. He is the former Chairman of the Board of Alaska Pacific University and continues to serve as a Trustee. He recently served as the Honorary Commander for the 477th Fighter Group at Elmendorf Air Force Base and is a co-founder and board member of the Anchorage Schools Foundation. Mr. Wanamaker is a graduate of the University of Chicago.

     David Karp, a director since March 2011, is the President and CEO of Northern Air Cargo, Inc. which operates a fleet of Boeing 737 aircraft within the state of Alaska and the contiguous U.S. states, Canada and Mexico. Prior to joining Northern Air Cargo, Mr. Karp served as the Vice President and COO of Anchorage-based Hawaiian Vacations for nearly seven years. Hawaiian Vacations transported approximately 50,000 vacationers between Alaska and Hawaii every year utilizing chartered Boeing 767 aircraft owned by Hawaiian Airlines. Before that, Mr. Karp served as the Executive Director of the Alaska Tourism Marketing Council, overseeing the cooperative tourism marketing efforts between the State of Alaska and over 1000 private sector tourism businesses. Mr. Karp also serves as a member of the Alaska Pacific University Board of Trustees and the Alaska Air Carriers Association Board of Directors. He is Chairman of the Board for the Alaska Aviation Museum. Mr. Karp is a graduate from the University of Oregon, and he completed the Owner President Manager Program at the Harvard School of Business in March 2011.

     Directors Not Standing for Re-election and their Business Experience

     Liane J. Pelletier, a director since October 2003 and Board chair since January 2004, served as our CEO and President from October 2003 through January 2011. During her tenure with us, she built the executive lead team, reconstructed the Board of Directors, and implemented a new business strategy, operating model and an organizational structure to reflect the Company’s strategy, as well as overhauled the Company’s image with investors, customers, employees and the community. Under her leadership, the Company designed and constructed Alaska’s first statewide 3G CDMA wireless network, built a submarine fiber optic cable to the contiguous U.S. and purchased one of three existing cables so that ACS now owns and operates two submarine cables, one of two carriers in the state with this infrastructure. These submarine assets complement the Metro Ethernet, MPLS, data hosting and managed services capabilities—all positioning Alaska Communications as a leader in end-to-end data networking for Enterprise customers. Prior to joining us, Ms. Pelletier’s career included 17 years at Sprint. She currently serves as a Trustee on the Board of the Nature Conservancy and on the Board of Directors for Icicle Seafoods, Inc. Ms. Pelletier earned her M.S. in Management at the Sloan School of Business at the Massachusetts Institute of Technology and a B.A. in Economics, magna cum laude, from Wellesley College.

Executive Officers

     The table below sets forth certain information as of April 1, 2011 about those persons currently serving as our executive officers. Biographical information on Anand Vadapalli, our President and CEO, is included above in the section “Nominees for Directors.”

Name		Age				Title
Anand Vadapalli			45			President and Chief Executive Officer
Wayne Graham(1)			49			Chief Financial Officer
Leonard Steinberg			57			Vice President, General Counsel and Corporate Secretary
Michael R. Todd			45			Sr. Vice President, Engineering & Operations
Foster C. Williams			55			Chief Human Resources Officer
Michael J. Wynschenk			51			Sr. Vice President, Sales

     Wayne Graham. Mr. Graham serves as our CFO. Mr. Graham is responsible for leading our finance, treasury, accounting, and investor relations functions and has key responsibilities in business strategy and cost structure rationalization, as well as performance measurement and metrics. Mr. Graham is one of the Company’s original founding members and a previous CFO of the Company. He rejoins the Company from Ensequence, a leading provider of global interactive software for TV, where he served as CFO. In addition to his roles at ACS and Ensequence, Mr. Graham previously served as CFO of Integra Telecom, a leading competitive local exchange company, and ACS Media, which was a publicly traded print and electronic yellow page provider, based in Alaska. In total, he brings over twenty-five years of relevant financial and industry experience. Mr. Graham holds a B.S.B.A. from Georgetown University and an M.B.A. from the University of Washington.

     Leonard Steinberg has served as our Vice President, General Counsel and Corporate Secretary since January 2001 after joining us as a senior attorney in June 2000. From 1998 to 2000, Mr. Steinberg used his expertise in regulatory and administrative law to represent telecommunications and energy clients of Brena, Bell & Clarkson, P.C., an Anchorage, Alaska law firm. Prior to that, Mr. Steinberg was a partner in the firm of Hosie, Wes, Sacks & Brelsford with offices in Anchorage, Alaska and San Francisco, California. Mr. Steinberg practiced in the firm’s Anchorage office from 1996 to 1998 and in the firm’s San Francisco office from 1988 to 1996 where he primarily represented large clients in oil and gas royalty and tax disputes. Mr. Steinberg holds a J.D. degree from the University of California’s Hastings College of Law, a Masters in Public Administration degree from Harvard University’s Kennedy School of Government, an M.B.A. from University of California Berkeley’s Haas School of Business, and a B.A. from the University of California at Santa Cruz.

     Michael R. Todd serves as our Senior Vice President, Technology. Mr. Todd joined Alaska Communications in August 2008. Before assuming his current position in October 2010, Mr. Todd served as our Vice President, Engineering and Service Delivery. Mr. Todd is responsible for all engineering, service delivery, information technology, and operations functions. Mr. Todd brings more than 20 years of telecommunications leadership and expertise with a focus on engineering/service delivery, building and maintaining wireless networks,

staff operations and multi-site development. His focus includes improving the overall customer experience through developing and executing long-term network evolution plans, establishing engineering and service delivery standards, coordinating cross-departmental process improvement teams to reduce cycle time, enhancing operational efficiencies and employee development. Prior to Alaska Communications, Mr. Todd held various engineering and operations leadership positions at Sprint, Nortel and Ericsson, Inc. He holds a BS in Engineering from Texas A&M University and an M.B.A. from the University of Texas.

     Foster C. Williams serves as our Chief Human Resources Officer. Appointed June 1, 2010, Mr. Williams is responsible for establishing our overall policy and strategy related to workforce planning and development, recruiting, total compensation, and labor relations. Prior to joining the Company, Mr. Williams was senior director, operations change management for Republic Services in Scottsdale, AZ, a U.S.-based solid waste company with 24,000 employees. His focus is on continuous process improvement and re-engineering to continually recalibrate our business processes, especially human resources services to internal customers, so that they may serve our valued external customers. Mr. Williams brings to Alaska Communications more than 30 years of human resources leadership and expertise with a focus on change management, talent management and organizational effectiveness and employee development. Mr. Williams has held various human resources leadership positions at Telus, Schlumberger Oilfield Services, Everlast Management Solutions, Halliburton, and Republic Services. Mr. Williams holds a B.A. from The University of Waterloo in Ontario, Canada.

     Michael J. Wynschenk serves as our Senior Vice President, Sales. Mr. Wynschenk joined Alaska Communications in March 2010. Before assuming his current position in October 2010, Mr. Wynschenk served as Vice President, Enterprise Sales. Mr. Wynschenk is responsible for the Company’s sales organizations serving the needs of all ACS customers, including consumers, businesses, enterprise business, government and telecommunications carriers. Mr. Wynschenk has more than 20 years of telecommunications sales experience as well as extensive knowledge in communications, security, outsourcing, and managed and professional services. He has held various sales and executive positions at Verizon, Expanets, Lucent Technologies and AT&T. He holds both a Master of Business Administration and Bachelor of Arts degree from San Francisco State University.

     Certain Relationships and Related Transactions

     Through our Audit Committee, we require review and approval or ratification of related party transactions. We may enter into a related party transaction only if the Audit Committee approves or ratifies such transaction and if it determines that the transaction is on terms and conditions that are reasonable under the circumstances and in the best interests of the shareholders. Pursuant to a written policy, our Audit Committee and our Nominating and Corporate Governance Committee each have procedures in place to ensure regular reporting regarding any related party transactions known to management — such transactions are a standard agenda item for each of these committees when they meet, and management reports any related party transactions which have occurred or are proposed.

     In reviewing related party transactions, we follow SEC guidelines which define a “related party transaction” as one in which we participate and that, individually or taken together with related transactions, exceeds, or is reasonably likely to exceed, $120,000 in amount in any year and in which any of the following individuals (a “covered person”) has a direct or indirect material interest:

	•		any director or executive officer;
	•		any nominee for election as a director;
	•		any security holder who is known by us to own of record or beneficially more than five percent (5%) of any class of our securities; or
	•		any immediate family member of any of the foregoing persons, including any child; stepchild; parent; stepparent; spouse; sibling; mother-, father-, son-, daughter-, brother-, or sister-in-law; and any person (other than a tenant or employee) sharing the same household.

     We do not deem a material interest to exist when a covered person’s interest in the transaction results from: (a) the covered person’s (together with his immediate family’s) direct or indirect ownership of less than a ten percent economic interest in the other party to the transaction, and/or the covered person’s service as a director of the other party to the transaction, or (b) the covered person’s pro rata participation in a benefit received by him solely as a security holder.

     A transaction is deemed to involve us if it involves one of our vendors or partners or any of our subsidiaries and relates to the business relationship between us and that vendor or partner.

     There have been no related party transactions since the beginning of the 2010 fiscal year nor are there any such transactions proposed.

     Section 16(a) Beneficial Ownership Reporting Compliance

     Federal securities laws require executive officers, directors, and owners of more than ten percent of our common stock to file reports (Forms 3, 4 and 5) with the SEC and any stock exchange or trading system on which our securities are listed. These reports relate to the number of shares of our common stock that each such person owns, and any change in their ownership. Based solely on our review of Forms 3, 4 and 5 filed with the SEC, we believe that all persons required to file such forms have done so in a timely manner during 2010.

     Corporate Governance

     We maintain corporate governance policies and practices that reflect what the Board of Directors believes are “best practices,” as well as those with which we are required to comply under the Sarbanes-Oxley Act of 2002 and the rules of the SEC and Nasdaq. Our Corporate Governance Principles and Guidelines may be viewed or downloaded from our investor relations website at www.alsk.com.

     Board of Directors

     The Board of Directors oversees direction of the Company for the long-term benefit of the shareholders. Currently, there are nine members on the Board of Directors, seven of whom (78% of the directors) are neither our officers, employees, nor former employees. Among the eight directors who have been nominated for election or re-election in 2011, only one, Mr. Vadapalli, is an officer, employee, or former employee of the Company. Ms. Pelletier is a former employee but is not standing for re-election. All of our other directors who are nominees to be voted on at the 2011 annual meeting have been determined to be Independent Directors.

     No directors received withhold/against votes of fifty percent (50%) or greater at the most recent annual meeting. The Board of Directors met five times and the Independent Directors also met separately in executive session five times in 2010. Our directors are required to hold specified minimum amounts of our stock, and all of our incumbent directors are in compliance with this requirement.

     Board Meetings and Committees; Annual Meeting Attendance

     All of the incumbent directors then serving attended: (i) the 2010 Annual Meeting of Shareholders (which they are all encouraged to attend); and (ii) at least seventy-five percent of the meetings of the Board and each committee during the period he or she was serving on the Board and any applicable committee.

     Board Leadership Structure — Board Chair and Chief Executive Officer

     Our Board’s independent leadership was further strengthened in early 2011 by separating the CEO and Chair functions, and appointing an Independent Director as Chair. Effective with the February 1, 2011 appointment of Mr. Vadapalli to the position of President and CEO, the Company separated the functions of the Board Chair and CEO. Previously, both roles were filled by Ms. Pelletier. Effective April 1, 2011, Ms. Pelletier resigned as Board Chair and also announced that she would not be standing for re-election as a director at the 2011 annual meeting. Therefore, in accordance with our Corporate Governance Principles, a non-executive Board Chair, Edward (Ned) J. Hayes, Jr., was selected by the Board to succeed Ms. Pelletier. Mr. Hayes has served on our Board since 2006 and previously served as the Chair of the Board’s Audit Committee.

     With the election of Mr. Hayes as Chair, the Board has also determined that the Lead Independent Director position occupied by Ms. Jacobs since 2007 will be suspended for as long as the Board Chair continues to be an Independent Director.

     The Board has determined that its leadership structure is appropriate given its judgment that there are advantages to having a non-executive Board Chair to provide independent oversight and for matters such as communications and relations between the Board, the CEO, and other senior management; in assisting the Board in reaching consensus on particular strategies and policies; and in facilitating a robust director, Board, and CEO evaluation process. The Board believes that as a result of this separated structure, the Board’s advisory and oversight roles will be effectively focused on assisting the CEO and senior management in seeking and adopting successful business strategies and risk management policies, and in making successful choices in management succession.

     Committees of the Board

     Our Board has four committees, the Executive, Audit, Compensation and Personnel, and Nominating and

Corporate Governance Committees.

     The Executive Committee comprises the Board chair, the chairs of each of the other standing Board committees and the Company’s President and CEO. The Executive Committee exists to assist the Board in managing the business and affairs of the Company, when it is impracticable for the full Board to act. The Executive Committee is not authorized to undertake any action that, under any applicable law, regulation or listing standard, must be performed by another committee of the Board or cannot be delegated to a committee of the Board.

     Audit Committee

     The purpose of the Audit Committee is to provide assistance to the Board of Directors in fulfilling the Board’s oversight of the Company’s accounting and system of internal controls, the quality and integrity of the Company’s financial reports, the assessment of major risks facing the Company and the review of options to mitigate such risks, and the independence and performance of the Company’s registered independent public accounting firm. The committee also monitors and evaluates the Company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including risk management procedures. The committee operates pursuant to a written charter adopted by the Board and available at www.alsk.com.

     The Audit Committee currently consists of three directors, none of whom are employees of the Company. The committee met nine times in 2010. The directors serving as committee members are Messrs. Ley (Chair), Hayes, and Rogers. The Board of Directors has determined that all of the members of the committee are Independent Directors. Our Board has also determined that Messrs. Ley and Hayes are “audit committee financial experts” as that term is defined under the Exchange Act. The Report of the Audit Committee is included in this proxy statement on page 55.

     Compensation and Personnel Committee

     The purpose of the C&PC is to discharge the Board’s responsibilities relating to Company compensation plans, policies and procedures including: (i) evaluation and establishment of director and executive officer compensation and performance; (ii) approval of equity and cash incentive programs for all employees of the Company; (iii) oversight of succession planning for executive officers and other management, as appropriate and (iv) production of an annual executive compensation report to be included in the Company’s proxy statement. The committee operates pursuant to a written charter adopted by the Board and available at www.alsk.com.

     The members of the C&PC are Messrs. Donahee (Chair) and Rogers. John M. Egan, a director who has since resigned, also served on the committee throughout 2010, when the committee met four times. The Board has determined that the members of the committee and Mr. Egan are all Independent Directors.

     The report of the C&PC is included in this proxy statement.

     Nominating and Corporate Governance Committee

     The Nominating and Corporate Governance Committee assists the Board in discharging its duties for screening and proposing candidates to serve on the Board and all matters of corporate governance. The committee is currently comprised of Ms. Jacobs (Chair) and Mr. Wanamaker. John M. Egan, an Independent Director who has since resigned, also served on the committee in 2010. The committee met four times in 2010. The Board has determined that each current member of the committee is an Independent Director, and the nominations of directors are in full compliance with the applicable Nasdaq Marketplace Rules. The committee operates pursuant to a written charter adopted by the Board and available at www.alsk.com.

     For director nominations, the committee does not require director candidates to meet any particular set of minimum qualifications other than those set forth in our By-laws regarding age, legal compliance, and validity of election and nomination. In assessing potential new directors, the committee considers individuals from various disciplines and diverse backgrounds. The committee reviews the suitability of each candidate in light of the Company’s needs for independence, expertise, experience, commitment, community ties, and other appropriate attributes. Some of the factors used in evaluating candidates include:

	•		ethical character and integrity;
	•		proven business judgment and competence;

	•		professional skills or management experience in dealing with a large, complex organization or complex problems similar or complementary to those encountered by our Company;
	•		knowledge of the Company’s various constituencies such as employees, customers and vendors;
	•		expertise in particular areas such as technology, finance, or marketing;
	•		strategic vision;
	•		diversity of professional experience and viewpoints;
	•		demonstrated ability to act independently and to represent the interests of all shareholders; and
	•		willingness and ability to devote the necessary time to fulfill a director’s responsibilities to the Company and our shareholders.

     Our shareholders may nominate candidates for director positions by timely submitting the candidate’s name, qualifications, and other information required in our bylaws, to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Alaska Communications Systems, 600 Telephone Avenue, Anchorage, Alaska 99503. The committee applies the same criteria to its evaluation of shareholder-recommended candidates as it applies to other candidates. Except as required by applicable law, the committee has no obligation to actually nominate shareholder-recommended candidates for election as a director.

     As referenced in our corporate governance principles available on our investor website at www.alsk.com, the committee considers a wide variety of qualifications, attributes and other factors in evaluating director candidates. Although the committee does not have a specific diversity policy, it recognizes that a diversity of viewpoints and practical experiences can enhance the effectiveness of the Board as a whole. Accordingly, as part of its evaluation of each candidate, the committee takes into account how that candidate’s background, experience, qualifications, and skills may complement, supplement or duplicate those of other prospective candidates. We believe a diverse group can best perpetuate the success of our business and represent shareholder interests through the exercise of sound judgment.

     The committee specifically reviews the qualifications of each candidate for the Board, whether an incumbent or not, for his or her understanding of our business and the competitive environment in which we operate. Factors evaluated for incumbent nominees include: attendance and participation at meetings of the Board and relevant Board committees, and independence, or any ties to our Company. Prior to nomination, each candidate for election or re-election must consent to stand for election to the Board.

     Executive Committee

     The Executive Committee has been delegated the authority by the Board of Directors to exercise the powers of the Board , between meetings of the full Board of Directors. The Executive Committee currently consists of five directors: Edward J. (Ned) Hayes, Jr. (Chair), Annette Jacobs, Gary Donahee, Peter D. Ley, and Anand Vadapalli. The Executive Committee did not hold any meetings in 2010.

     Director Nomination Process

     The Nominating and Corporate Governance Committee assesses all director candidates, whether submitted by management or a shareholder, and recommends nominees for election to the Board. Recommendations for election are based upon the factors described above under the heading: “Committees of the Board—Nominating and Corporate Governance Committee.”

     Each year, including in 2011, the Nominating and Corporate Governance Committee reviews eligible director candidates, based on the criteria listed in the description of the committee, above.

     The Nominating and Corporate Governance Committee welcomes shareholder recommendations of director candidates. Shareholders may suggest candidates for consideration by the committee by submitting their suggestions in writing to the Company’s Corporate Secretary. Shareholder nominations must comply with the procedures set out in the Company’s By-laws.

     Based on the process described above, the committee recommended and the Board determined to nominate each of the eight incumbent directors who have consented to stand for election at the 2011 annual meeting of shareholders. The committee and the Board concluded that each of these eight incumbent directors should be nominated based on the diversity and extent of their experience, qualifications, attributes and skills, as

identified in the biographical information contained under the heading: “Proposal 1: Election of Directors,” above, and as further discussed for each nominee below. The individual nominees’ experience relates to and derives from a broad range of occupations and industries, which provides both differing viewpoints among the nominees and familiarity with markets and businesses targeted by our Company for execution of its business plans. Individual nominees also have significant substantive expertise in several areas applicable to their service on the Board, including strategic planning, corporate governance, finance and audit, operations management and telecommunications technology.

Particular factors considered by the committee for each nominee for election to the Board in 2011 are:

     Anand Vadapalli: Mr. Vadapalli’s factors include his strategic vision and his wide-ranging, in-depth knowledge of our business operations and the competitive landscape in which our Company operates. Additionally, his extensive experience in the industry and comprehensive knowledge of our Company’s many competitive challenges and opportunities are a useful contribution to the Board’s deliberative process.

     Brian D. Rogers: Mr. Rogers’ factors include his executive experience as the head of a large, complex organization, his extensive experience and expertise in the areas of finance and financial management, his knowledge of and ties to the Alaska community, and his prior experience on the University of Alaska, Board of Regents, including serving as chair.

     Gary R. Donahee: Mr. Donahee’s factors include his worldwide executive leadership experience in the telecommunications industry, his operations management experience, his strategic business knowledge and his expertise in corporate human resources management.

     Edward (Ned) J. Hayes, Jr.: Mr. Hayes’ factors include his extensive executive and financial management expertise, including as a CFO and in other senior financial management positions at large, publicly traded companies in the computer, broadband, communications and data storage industries, and his prior board experience as chair of audit committees. Mr. Hayes also has been determined to be an audit committee financial expert as that term is defined by Nasdaq and securities law.

     Annette Jacobs: Ms. Jacobs’ factors include her senior executive leadership experience at both publicly traded and privately held companies, her knowledge of and experience with the telecommunications business, her experience with retail markets and in leading associations of board directors. Ms. Jacobs has also completed forty credit hours of qualified Institutional Shareholder Services, Inc. director education in the past two years.

     Peter D. Ley: Mr. Ley’s factors include his extensive executive, finance and communications industry experience, including his work as a CFO of technology and telecommunications companies and as an investment banker. Mr. Ley has also been determined to be an audit committee financial expert as that term is defined by Nasdaq and securities laws.

     John Niles Wanamaker: Mr. Wanamaker’s factors include his extensive experience stewarding emerging technology-based ventures, success in finding profitable market positions, and pervasive connection to the Alaska and Pacific Northwest business markets .

     David Karp: Mr. Karp’s factors include his leadership of a service-based firm operating across Alaska; experience expanding into the contiguous 48 states; background in travel and as a business buyer of the services that are key to the Company’s growth; and, finally, his reputation as a motivational leader, manager and respected member of the Alaska community.

     The committee and Board assessed these factors for each nominee in light of our Company’s main business lines and offerings, its customers and the needs of the Company.

     Board Self-Evaluation

     The Board of Directors conducts a self-evaluation of its performance annually, which includes a review of the Board’s composition, responsibilities, leadership and committee structure, processes and effectiveness. Each committee of the Board, other than the Executive Committee, conducts a similar self-evaluation with respect to such committee.

     Code of Ethics

     In order to help assure we practice the highest levels of business ethics, we have adopted a Code of Ethics, which is posted on our investor website at www.alsk.com. We post amendments to or waivers from the provisions applicable to senior executives on our website. A copy of our Code of Ethics is also available upon request to our Corporate Secretary.

Risk Oversight

     Role of Board and Committees

     The Board, with the primary assistance of the Audit Committee, oversees management of the risks inherent in the operation of our Company’s lines of business and implementation of its business plans. The Board performs this oversight role through several different levels of review. In connection with its reviews of the operation of the lines of business and corporate functions, the Board addresses the primary risks associated with of the Company’s business. In addition, the Board reviews the risks associated with the Company’s strategic plans at its annual strategic planning session and periodically throughout the year as part of its continuing consideration of the strategic direction of the Company. Finally as part of the annual report preparation and filing, the Board performs a holistic review of the Company’s risk profile and advises management on how best to reflect those concerns in the Company’s reporting.

     The Board relies primarily on the Audit Committee to provide continuing oversight of the Company’s management of enterprise risk, including the identification of the primary risks to the Company’s business and interim updates of those risks, and periodic monitoring and evaluation of the primary risks associated with particular lines of business and functions. The Company’s General Counsel, for example, reports to the Audit Committee on the Company’s legal risks, emergency management plans, environmental, health and safety compliance and insurance coverage. Similarly, the Company’s Executive Vice President and CFO reports to the Audit Committee on the Company’s business and financial risks. The Audit Committee assists management in identifying and evaluating risk management controls and methodologies to address identified risks.

     Other Board committees also oversee the management of Company risks that fall within the committee’s areas of responsibility. In performing these functions, each committee has full access to management, as well as the ability to engage its own independent advisors. For example, the Nominating and Corporate Governance Committee addresses risk by adopting appropriate rules for corporate governance and monitoring the Company’s compliance with our corporate governance guidelines. As described in more detail below under the heading “Analysis of Risk in Compensation Practices,” the C&PC considers the impact of the Company’s executive compensation program and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company regularly evaluates its compensation policies and procedures to determine whether they present a significant risk to the Company.

     We believe the current leadership structure of the Board supports the risk oversight functions described above by providing independent leadership at the committee level, with ultimate oversight by the full Board.

     Analysis of Risk in Compensation Practices

     Consistent with the SEC’s disclosure requirements, we have assessed our Company’s compensation programs for all employees and have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. Management has evaluated the Company’s executive and employee compensation and benefits programs to determine if these programs’ provisions and operations create undesired or unintentional risk of a material nature. The risk assessment process includes a review of program policies and practices; analysis to identify risks and risk controls related to our compensation programs; and determinations as to the sufficiency of risk identification, the balance of potential risk to potential reward, the effectiveness of our risk controls and the impacts of our compensation programs and their risks to Company strategy. Although we periodically review all compensation programs, we focus on the programs with variability of payout, with the ability of a participant to directly affect payout and the controls on participant action and payout.

          Our compensation programs generally include the elements of base salary, performance-based cash incentive compensation, equity awards, and other standard employee benefits, which are generally uniform in design and operation throughout the Company and with all levels of employees. Variable pay components for employees below the executive level are a smaller percentage of their overall compensation. Certain internal groups have different or supplemental compensation programs tailored to their specific roles in the Company; for example, our sales personnel are paid primarily on a sales commission basis. A majority of our workforce is also unionized, and their compensation is generally determined based on the requirements of our collective bargaining agreement.

          In structuring our variable pay programs and related performance metrics, the C&PC carefully considers the impact of our pay practices on the Company’s risk profile. Our compensation program is intended to robustly promote a results-centered, performance-based culture so as to effectively drive business and financial results, without incurring unacceptable risk. Accordingly, the C&PC has created a balance of short-term and long-term financial rewards for our executive team, with both cash and equity components, providing strong incentives for our executives to judiciously balance risks and rewards consistent with the long-term interests of our shareholders. The process of annual goal-setting and the measurements used for determining incentive pay are subject to multiple levels of review and approval, and Company results are determined based on our audited financial statements, thus ensuring that significant rigor and oversight attends the variable compensation process. To further strengthen our controls on risk-taking, we have worked to incorporate best pay practices for our executives, including clawbacks, minimum equity holding requirements and prohibitions on hedging or otherwise encumbering unvested equity grants.

          The C&PC monitors our compensation programs on an annual basis and makes modifications as necessary to address any changes in the Company’s business or risk profile.

          Based on the foregoing, we believe that our compensation policies and practices do not create inappropriate or unintended material risk to the Company. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond our Company’s ability to effectively identify and manage significant risks and are compatible with effective internal controls and the risk management practices of the Company.

Director Compensation

          The following table sets forth for each of our directors, unless such director is also a NEO, the aggregate dollar amount of all fees earned or paid in cash for services as a director in 2010, including annual retainer fees, committee and/or chairmanship fees, and meeting fees. For awards of stock, the table reflects an aggregate grant date fair value computed in accordance with ASC 718, in each case for the year ended December 31, 2010.

				Fees Earned
				or Paid in								All Other
				Cash				Stock Awards(2)				Compensation
Name		Year		($)				($)				($)
Brian D. Rogers		2010			16,250				54,145			—
John M. Egan		2010			—				55,145			—
Gary R. Donahee		2010			26,250				36,895			—
Edward J. Hayes, Jr.		2010			17,389				55,756			—
Annette M. Jacobs		2010			28,506				38,139			—
David A. Southwell		2010			12 (1)				26,195			—
Peter D. Ley		2010			31,005				37,140			—

          Effective on January 1, 2010, our Board of Directors approved an amended Non-Employee Director Compensation Policy for Independent Directors (the “Policy”). Under this Policy, we provide compensation to the Independent Directors consisting of a $20,000 annual retainer payable in quarterly installments, plus additional annual retainers of $5,000 to the chair of the Audit Committee and the chair of the C&PC. The Lead Independent Director receives an additional annual retainer of $10,000. The Independent Directors also receive annual grants of 3,000 shares of our common stock or equivalents in quarterly grants of 750 shares, which are automatically granted on the last trading day of each quarter, and vest immediately.

          In addition, in 2010 our directors were paid $1,500 (or $750 for telephonic attendance) for each Board of Directors and/or committee meeting attended in person, except for audit committee meetings. The audit committee members were paid $2,500 for each audit committee (or $1,250 for telephonic attendance). Directors are also reimbursed for their reasonable expenses directly associated with provision of services for the Company. Independent Directors may elect to receive all or a portion of their cash retainer and meetings fees in common stock or equivalents.

          On April 1, 2011, our Board approved further changes to the Policy. The Policy now provides that a non-employee Board Chair will receive an annual retainer of $100,000, payable in four quarterly installments of $25,000 each and an annual grant of shares or share equivalents valued at $50,000, payable in four quarterly installments of $12,500 worth of shares based on the closing price at the end of each quarter. A non-employee Chair will not be eligible for committee chair or meeting fees under the Policy.

          Director Stock Ownership Guidelines

          Our Board of Directors has adopted minimum share ownership requirements for Board members because we believe the Board will more effectively pursue the long-term interests of shareholders if the members are shareholders themselves. Our director compensation policy requires each non-employee director to accumulate and hold at least 5,000 shares of our common stock or stock equivalents by March 2010 or the fifth (5th) anniversary of the director’s continuous service to our Board, whichever is later. All of our directors are in compliance with this requirement.

Compensation Discussion and Analysis

          Overview

          The compensation discussion and analysis (“CD&A”) in this section provides information regarding the 2010 compensation program for the executive officers named in the “Summary Compensation Table,” presented below. We refer to these officers as our NEOs. In this CD&A, we have also included certain information that contains “forward-looking statements,” as that term is defined under U.S. securities laws. Forward-looking statements are statements that are not historical facts and may include financial projections, estimates of the impacts of proposals or other descriptions of the Company’s plans, objectives or intentions. This information is based on our current knowledge and assumptions. Please be aware that actual results, including compensation plans and arrangements that may be used in the future, may vary from those we currently use or expect to use in the future.

          The C&PC believes that our long-term success depends in a large measure on the talents and dedication of our executive management team and our employees. The discussion and analysis that follows sets forth the C&PC’s methodology through which it makes executive compensation determinations. The C&PC seeks to confer value on our executives through carefully crafted compensation programs designed both to align executive focus with that of our shareholders and to reward executives that successfully further our corporate strategy.

          When reviewing the compensation program and our performance metrics, the C&PC considers how our compensation program supports the Company’s business objectives, strategy, performance, and risk profile. The C&PC seeks to structure the compensation program to provide incentives for executives to appropriately balance risk and reward consistent with the Company’s long-term business and risk management objectives, in order to most effectively further our shareholders’ interests. One measure of our success in this regard is our total return provided to shareholders over time. As reflected in the Performance Graph on page 5 of this proxy statement, our Company has consistently outperformed both the S&P 500 Index and the Nasdaq Telecommunications index companies in TSR year over year for each of the past five years. In 2010, this trend continued, with a TSR of 52.39%, for our Company while the S&P 500 and Nasdaq Telecommunications Indices returned 15.05% and 29.11%, respectively, over the same one-year period.

          Summary of Recent Compensation Decisions

          Our executive compensation program is designed to attract, incent and retain individuals with the leadership skills necessary to develop and execute the Company’s strategic direction and to achieve long-term performance goals so as to create and enhance shareholder value. Over the past several years, we have been focused on transforming the Company from a traditional provider of wireline and wireless telecommunications services to a leading provider of broadband and other integrated data solutions in and out of Alaska. Toward that goal, we seek to use our executive compensation program to motivate and reward progress in that transformation. Our program seeks to align executive compensation with shareholder value on an annual and long-term basis through a combination of the following types of compensation: base salary, annual cash incentive compensation awards, and long-term incentive compensation in the form of equity-based grants.

          2010 Compensation

          For 2010, we reported overall earnings before interest, taxes, depreciation and amortization (“EBITDA”) that modestly exceeded our “2010 Company Performance Target” for EBITDA, and also exceeded our EBITDA results reported for 2009 by approximately four million dollars. Though enterprise revenue increased overall 7.1% for the year over 2009, it was below the aggressive Company Performance Target we had set for ourselves in 2010. Wireless revenue also was slightly below the 2010 Company Performance Target set by the C&PC for this metric. These results, along with the C&PC’s consideration of individual performance, primarily drove our compensation of our NEOs in 2010.

          Incentive compensation actually paid to our NEOs for 2010 was consistent with these reported results. Cash incentive awards were below target across the NEOs, reflecting the less than expected revenue results, but

balanced against EBITDA results that exceeded expectations. A further adjustment in the cash incentive payment to certain of our NEOs was made based on individual performance, as described below.

          One-third (1/3) increments of performance-accelerated restricted stock units granted to our NEOs in each of the prior three years vested in 2011 based on the above-target EBITDA results achieved in 2010. However, long-term incentive compensation for our NEOs, which vests on an accelerated schedule based on the cumulative EBITDA results compared to targets over the past three years, did not vest in 2010, because our one-year 2009 EBITDA results were below target. Our pay philosophy and objectives and the components of our total direct compensation provided to our NEOs are described in more detail later in this CD&A, and the total compensation actually paid is reported in the Summary Compensation Table, below.

          Compensation Changes Implemented in 2011

          The C&PC engaged an independent compensation consultant in 2010, as it typically does every other year, to assist it in evaluating our executive compensation program. Based on this review, which included peer company comparisons, and in recognition of the rapidly evolving nature of our business and our emphasis on pay-for-performance principles, the C&PC has made a number of structural changes, particularly as related to our NEOs’ equity awards, which are being implemented in 2011. A summary of this compensation structure as approved by the C&PC is set forth here, and the changes are discussed in more detail in sections that follow:

	•		Our NEO base salaries are generally set below the median of our peer companies all across our current executives; the majority of all executive compensation, therefore, is performance-based.
	•		Performance-based cash incentive awards represent a higher proportion of total cash compensation than is typical amongst our peers.
	•		Starting in 2011, we are shifting two-thirds of our annual NEO equity awards to performance stock unit (“PSU”) grants, which only vest (in one-third increments) upon achievement of Company Performance Targets, as determined by the C&PC, in each of the three years following the year of the grant.
	•		Also starting in 2011, the remaining one-third of our annual NEO equity awards will be provided as time-vested restricted stock units, which vest in one-third increments in each of the three years following the year of the grant, as long as the executive continues to be employed with us.
	•		Annual grants of performance-accelerated restricted stock units have been discontinued.
	•		By awarding a significant proportion of compensation as equity grants, the Company is able to redeploy cash resources that would otherwise be used for compensation purposes to further the Company’s business, while ensuring that executives’ interests are aligned with our those of shareholders.

          These changes are intended to further increase alignment of our executives’ compensation with our pay-for performance philosophy and emphasis on return of long-term shareholder value, while continuing to make smaller annual grants of restricted stock units to encourage retention of key leaders of the Company. The changes to equity grants apply to all new grants of stock or stock units to our NEOs going forward commencing in 2011.

          Proposed 2011 Incentive Award Plan

          As an additional outcome of its 2010 executive compensation study, the C&PC determined that our existing shareholder approved employee and non-employee director stock incentive plans should be retooled in keeping with current best compensation practices. This decision has led to the inclusion of a proposal for shareholder approval in this proxy statement (Proposal 2) requesting shareholder approval of a new consolidated director and employee Incentive Award Plan. Proposal 2 generally contemplates that all available shares previously authorized by shareholders for use as director and employee incentive compensation under the Alaska Communications Systems Group, Inc. 1999 Stock Incentive Plan (“1999 Stock Incentive Plan”) and the Alaska Communications Systems Group, Inc. 1999 Non-Employee Director Stock Compensation Plan (“1999 Director Stock Plan” ) (collectively the “1999 Plans”) will be transferred and made available for equity grants only under the terms and conditions of the 2011 Plan. No additional shares beyond those previously approved by shareholders for our 1999 Plans are being requested for the new 2011 Plan.

          The proposed 2011 Incentive Award Plan makes substantive changes in our existing stock incentive and non-employee director stock plans that will benefit our shareholders. Key components of the 2011 Plan are summarized here and the plan is described in more detail later in this proxy statement under the heading: “Proposal 2: Adoption of the Alaska Communications Systems Group, Inc.’s 2011 Incentive Award Plan.” Among other changes, the 2011 Incentive Award Plan will:

	•		Provide that shares tendered and then withheld to satisfy exercise or withholding obligations under the 2011 Incentive Award Plan may not be used to replenish the share pool and thus will be unavailable for subsequent equity grants to our directors or employees. This change will eliminate a disfavored practice which is currently available under our 1999 Stock Incentive Plan.
	•		Provide that equity awards under the 2011 Incentive Award Plan are subject to the terms of any “Clawback Policy” required by law or by Company policy. The addition of such a clawback provision is consistent with recent changes in the law and pay practices; however, such a provision is not a feature of our 1999 Stock Incentive Plan, which predates current clawback practices.
	•		Remove provisions that allow the opportunity for automatic acceleration of stock vesting if the Company experiences a change in control. Such “single trigger” change-in-control provisions are not considered best pay practices, though they are permitted under our 1999 Stock Incentive Plan.
	•		Provide the shareholder vote of approval necessary under the Internal Revenue Code (the “Code”) for performance-based executive compensation in excess of $1 million to be deductible by the Company in accordance with Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Shareholders will benefit from a reduction in the Company’s tax obligations.
	•		Combine and consolidate our existing non-employee director and employee stock incentive plans, which are currently maintained as separate documents, into a single Company incentive award plan, which will be effective for ten (10) years, through April 19, 2021. This consolidation will promote efficiency of stock plan administration and is in keeping with recent trends in the design of incentive award plans.

          Shareholder approval is necessary in order for the Company to implement this new 2011 Incentive Award Plan. The C&PC and our full Board of Directors recommend that our shareholders give their approval to the 2011 Incentive Award Plan.

          Say-on-Pay and Say-When-on-Pay Shareholder Advisory Votes

          In accordance with enhanced disclosure rules adopted by the SEC in January 2011, two additional proposals related to executive compensation are also presented by management for approval by our shareholders at our 2011 annual meeting.

          In Proposal 3, the Company is providing an opportunity for our shareholders to cast an advisory vote on our current executive compensation program. The advisory vote on executive compensation is referred to as a “Say-on-Pay” vote, and it is described in more detail later in this proxy statement under the heading: “Proposal 3: Advisory Vote on Executive Compensation.”

          Proposal 4 affords our shareholders the opportunity to cast an advisory vote on how often the Company should include the “Say-on-Pay” vote contained in Proposal 3 in its proxy materials for future shareholder meetings. Under this Proposal 4, also referred to as “Say-When-on-Pay,” shareholders may indicate their preference as to whether the “Say-on-Pay” proposal is presented every year, every two years or every three years in the future, or shareholders may abstain from voting. Proposal 4 is described in more detail below under the heading: “Proposal 4: Advisory Vote on Frequency of Future Advisory Votes on Executive Compensation.

          The C&PC recommends a “FOR” vote by shareholders on Proposals 2 and 3, and an “ANNUAL” frequency for future Say-on-Pay advisory votes under Proposal 4.

          Executive Leadership Transition

          Our Board of Directors oversaw an important transition of the executive leadership of the Company in late 2010 and early 2011. On December 1, 2010, an amendment to Ms. Pelletier’s employment agreement was executed to begin transitioning the President and CEO position from Ms. Pelletier to Mr. Vadapalli. Effective February 1, 2011, Ms. Pelletier’s role changed from President and CEO to a transition officer and, in accordance with the Board’s transition plan, our COO, Mr. Vadapalli, became the new President and CEO of the Company. Ms. Pelletier continued as a transition officer until the expiration of her employment agreement on April 1, 2011, at which time she terminated her employment with the Company. Mr. Vadapalli serves as the current President and CEO of the Company.

          On March 1, 2011, a transition of the CFO position was announced. Mr. Wilson’s 2009 employment agreement was amended and, in accordance with the amendment, Mr. Wilson stepped down as CFO on April 1, 2011, while continuing to serve in a transition role through April 30, 2011, at which time his employment with the Company terminates. Mr. Graham joined the Company as its new CFO on April 1, 2011. Mr. Wilson will continue to assist Mr. Graham with the CFO transition through June 30, 2011 as a consultant to the Company.

          Our Compensation Philosophies and Goals

          The qualities, abilities and commitments of our NEOs are considered significant contributing factors to the proper leadership of our Company and the driving force for delivering shareholder value. Our compensation policies are designed to:

	•		Pay base salaries below the median of our peers. We have structured our executive compensation to pay below-median base salaries to our executives, and require them to earn the full value of their total compensation packages through a higher proportion of performance-based pay, which includes both cash and equity components. By making equity grants a significant portion of our at-risk compensation, the Company also conserves cash resources which can be used to further the interests of the business.
	•		Provide pay for performance for the majority of our compensation. Over one-half (1/2) of the total target compensation of all of our NEOs is expected to be “at-risk” and is paid based on achievement of annual or long-term Company performance goals and individual performance. Target cash incentive compensation constitutes fifty percent (50%) of the total target cash compensation for each of our executives. In addition, in accordance with changes approved by the C&PC based on its 2010 review of our compensation structure, sixty-seven percent (67%) of our equity awards in 2011 and future years will be in the form of PSUs that only vest if performance targets are achieved by the Company; otherwise, they are forfeited.
	•		Align executives’ compensation with shareholder interests. Our compensation practices are designed to align our executives’ interests with those of our shareholders through a mix of cash and long-term equity incentive compensation. Equity awards and significant equity holding requirements, in particular, are intended to ensure that our executives’ long-term interests are aligned with those of our shareholders.
	•		Motivate executives to pursue growth of cash generated by our business operations. At-risk compensation has generally been determined based on sustained growth of cash by our operations that can be attributed directly to management efforts, together with key revenue generation goals. We believe this approach to compensation directs our executives toward achieving long-term profitable growth, disciplined capital allocation, and value delivery to our shareholders.
	•		Assure all opportunities for long-term growth are pursued. While our performance targets have, since 2005, been based principally on growth of cash provided by our business operations, a portion of our NEOs’ equity compensation is also determined based on the Company’s performance three years in the future, thus providing significant incentive for our executives to remain focused on the long-term growth of the Company.
	•		Compete for, and retain, top talent. Our objective is to provide compensation and benefits that are in alignment with the market for the talent we seek. To this end, an independent study of our executive

compensation programs is typically completed every two years, to ensure our total cash and equity compensation packages are competitive with peers in the market. The C&PC also adjusts our compensation program as necessary to ensure we offer the optimum mix of annual cash incentives and long-term equity incentives to attract and ensure the retention of key talent.

          Components Comprising Total Executive Compensation

          Each separate component of our executive compensation package is described in more detail in the paragraphs that follow.

          Cash Compensation

          In determining cash compensation paid to our NEOs, the C&PC first determines the “total target cash compensation” that would be required to attract and retain qualified executives. As described above, the C&PC has determined that base salary and target annual cash incentive amounts should each generally comprise fifty percent (50%) of an executive’s total target cash compensation, reflecting a significant portion at risk, but with an upside for our executives if the Company performs well.

     Base salaries

          Our NEOs’ respective employment arrangements provide for annual base salaries as set forth in the “Salary” column of the Summary Compensation Table below. Base salary levels are established by considering a number of factors, including the needs of the Company, the nature and responsibility of each NEO position, the particular qualifications, experience and expertise of the individual executive, competitiveness of the market for the executive’s services, the executive’s potential for driving the Company’s success in the future, individual performance, and other judgmental factors deemed relevant by the C&PC. Base salaries for our NEOs are generally below the median salaries paid by our peer companies. Base salaries were generally set at the same level in 2010 as in 2009, except for Mr. Vadapalli’s, whose base pay was increased in February 2010 in conjunction with his promotion to assume significantly increased breadth and scope of duties as the Company’s COO (and again in 2011 consistent with Mr. Vadapalli’s appointment as President and CEO). As COO, Mr. Vadapalli had responsibility for overseeing all operations and sales of the Company.

     Annual Cash Incentive Awards

          Annual cash incentive awards represent the performance-based portion of our NEOs’ total target cash compensation. Annual cash incentive targets are set at one hundred percent (100%) of base salary for all our NEOs, representing the C&PC’s determination to set a higher proportion of compensation at risk than is generally the case for our peer companies. During the first quarter of each year, the C&PC establishes Company performance targets and individual goals applicable to that year. The target awards for an individual participant may be revised during the year as a result of a promotion or other change of the individual’s position. We have no multi-year or guaranteed bonus provisions applicable to any of our NEOs.

          Annual cash incentive awards generally occur during the second quarter of the year following the performance year, after completion of the Company’s audited financial statements. Cash incentive payouts to NEOs are not made if the Company does not achieve a predetermined percentage of the Company Performance Targets. Cash incentive payouts to NEOs may be diminished when actual performance is less than the Company Performance Target and enhanced when actual performance exceeds 100% of the Company Performance Target. Cash incentive payments for NEOs generally may not exceed 200% of the annual target amount under our executive compensation plan.

          Finally, in addition to the Company Performance Target, each NEO’s award may be further adjusted upward or downward based on the C&PC’s evaluation of individual performance. This can result in cash incentive payouts greater or lesser than what would otherwise have been payable based solely on the calculation of Company Performance Target and results described in the previous paragraph.

     Special Cash Incentive

          As specified in his employment agreement as amended in 2010, a one-time cash payment in the amount of eighteen thousand seven hundred fifty dollars ($18,750.00) was made to Mr. Vadapalli in February 2010 in recognition of his efforts and as a reward for accepting the expanded role of COO, a position which he assumed in November 2009. As part of his employment arrangement with the Company, Mr. Williams’ received a one-time cash payment of fifty thousand dollars ($50,000.00) in July 2010 as an incentive for joining the Company as its Chief Human Resources Officer.

          Equity Compensation

          The discussion of equity compensation below first addresses 2010 equity awards, and then describes modifications in our equity grant program that the C&PC has put in place effective in 2011.

     Equity Awards in 2010 and Prior Years

     Performance-Accelerated Restricted Stock Units

          As in prior years (since 2005), one-half of the 2010 annual grants of equity to our NEOs were provided as performance-accelerated restricted stock units. These restricted stock unit awards vest after five years of continued employment with the Company. One-third of these awards can also vest on an accelerated basis in each of the three successive years following the year of the grant if we achieve the annual Company Performance Target for the year prior to the year the grant actually vests.

     Long-Term Performance-Accelerated Restricted Stock Units

          One-half of the total performance-accelerated restricted stock units granted to our NEOs in 2010 were designated as long-term. These “long-term” performance-accelerated restricted stock unit awards have been granted to our NEOs each year since 2005. The awards accelerate and vest in full if we achieve the three-year cumulative Company Performance Target during the successive three-year period following the year of the grant. The cumulative Company Performance Target is the sum of the three annual goals set at the beginning of each year during the performance period. Long-term restricted stock unit awards vest five years after the date of the grant, regardless of actual performance, if the NEO remains employed continuously with the Company until the vest date.

     2011 Equity Awards Program

          Based on its review of our executive compensation program and other compensation data, including the study completed by the C&PC’s independent compensation consultant in 2010 and comparison to peers, our Company’s compensation goals and objectives, and changes in the nature of our business, the C&PC determined to make changes to the structure of our NEO annual equity grants starting in 2011. It first decided that performance-accelerated restricted stock units and long-term performance-accelerated restricted stock units will no longer be components of our equity grants. Instead, the emphasis has been shifted predominantly to grants of PSUs, which have no time vesting potential. Smaller grants of time-vested restricted stock units comprise the balance of our restructured equity grant program. This modified equity compensation plan is designed to further increase the emphasis on pay-for-performance and long-term results of the Company, while the more limited grants of time-vesting restricted stock unit grants provide balance and continue to promote retention of our key executives.

          As a result of these changes, our NEOs’ incentive compensation will depend on Company performance levels to a greater degree than previously. This is consistent with our pay-for-performance philosophy in our rapidly changing business. The C&PC believes the changes in equity compensation approved for 2011 will align our NEOs interests even more closely with our shareholders’ interests, while still providing sufficient incentive to retain the key leadership of our company.

     2011 Performance Stock Units

          Sixty-seven percent (67%) of our NEOs’ total target annual equity grants are now in the form of PSUs. These PSUs vest only if the Company’s performance in each of the three years following the year of the grant achieves the Company Performance Target for each of those years. One-third of the PSUs will vest in each of

the three years if Company Performance Target for that year is met or exceeded. Otherwise, the PSUs are forfeited. Vesting occurs the year following the performance year, after Company financial results have been determined based on audited financial statements.

     2011 Time-Vested Restricted Stock Units

          In order to encourage retention and provide a further long-term incentive for executives to remain with the Company, the C&PC determined that thirty-three percent (33%) of our NEOs’ annual equity awards will be granted as time-vested restricted stock units, starting in 2011. These restricted stock units will vest in one-third increments in each of the three years following the year of the grant, as long as the NEO remains continuously employed with the Company.

          Constraints on All Equity Grants

          Our NEOs may not hedge, pledge, or otherwise encumber any securities comprising an equity-based award, nor may they sell any awards for cash before the award vests in accordance with the terms of the applicable grant agreement. In addition, we do not pay dividends (or gross up equity awards for dividend equivalents) on unvested equity-based compensation. We also do not allow re-pricing or exchange of options for shares or cash. As discussed further below, minimum stock holding requirements apply to all our NEOs.

          Other NEO Benefits

          Our NEOs receive standard health, welfare and retirement benefits which are available to all or substantially all employees of the Company. There are no special or supplemental retirement benefits provided under our executive compensation program.

          2010 Performance Targets

          Cash Incentive Targets

          The C&PC established the Company Performance Targets for payment of cash incentive compensation in 2010 to reflect the changing nature of our business, and especially the increased emphasis on enterprise and wireless data revenue as key contributors to our business’ future success. Consequently, the C&PC established three Company Performance Targets for payment of our NEOs’ 2010 cash incentive compensation. The first 2010 target was to attain an annual EBITDA amount equal to or greater than $124.6 million. As in 2009, this EBITDA target was not adjusted for maintenance capital expenditures (as it was in prior years). The EBITDA target was chosen because the C&PC believes EBITDA to be the most direct and compelling indicator of the Company’s overall success in generating free distributable cash and increasing shareholder value during the fiscal year because it eliminates the effects of period-to-period changes in costs associated with capital investments, interest and stock-based compensation expense that are not directly attributable to the underlying performance of the Company’s business operations. We define EBITDA as earnings before interest, tax, depreciation, amortization and stock-based compensation expense. EBITDA is not a Generally Accepted Accounting Principle measure, and our measurement of EBITDA may differ from other companies.

          The C&PC also set two new revenue Company Performance Targets that apply to payments of cash incentives to our NEOs for 2010. The second Company Performance Target was a target enterprise revenue of $53.7 million, and the third Company Performance Target was a target for wireless revenue of $143.6 million. These goals were chosen because of their importance to the Company’s future success in an increasingly data-driven market for services. The EBITDA, enterprise revenue and wireless revenue Company Performance Targets are each weighted as one-third of the total Company Performance Target in determining the payout to our NEOs based on our 2010 results. The amount of target cash incentive actually awarded to each NEO is determined based upon the Company’s performance against these three Company Performance Targets, as well as the individual performance of each executive. Upward or downward adjustments in the cash awards (within a specified range) are made if the Company exceeds or falls short of its annual Company Performance Targets. Company performance below certain thresholds (90% of target in the case of enterprise revenue and 95% of target EBITDA and wireless revenue) results in no payout for that one-third portion of the NEO’s cash incentive compensation. Overachievement of the EBITDA performance target is rewarded by an accelerated cash incentive payout ratio. A maximum payout equal to 200% of the target cash incentive amount applies as the upper limit for cash incentive awards to our NEOs.

          Equity Vesting Targets

          The 2010 Company EBITDA target of $124.6 million also served as the Company Performance Target for accelerated vesting of short-term performance-accelerated restricted stock unit grants. For vesting of long-term performance accelerated restricted stock units to occur, the cumulative total of the annual Company EBITDA targets for the past three years (2008 through 2010 ) is compared to the cumulative actual EBITDA results (as adjusted for maintenance capital expenditures in 2008 only). The cumulative three-year EBITDA Company Performance Target for the 2008 through 2010 period was $347.6 million.

          2010 Company Results

          Our 2010 business results, together with the C&PC’s assessment of individual NEOs’ performance, served as the determinants for how the C&PC ultimately decided to compensate our CEO and our other executive officers for 2010. Our 2010 results for EBITDA performance outpaced the Company Performance Target for the fiscal year. However, our enterprise revenue and wireless revenue results were below the Company Performance Targets for the year, which decreased the overall payout of cash incentive compensation available to our NEOs.

          The C&PC nevertheless believes our executive team has positioned the Company to achieve long-term growth by anticipating and addressing major changes in the telecommunications industry and making the capital investments necessary to ensure long-term success. As in prior years, the executive team remained focused on targeted capital investments, disciplined resource allocations and cost management, thus enabling the Company’s ability to grow distributable cash generated by the business over the long term. In line with our objectives, the executive team kept the strategic focus on growth of the enterprise line of business, which expanded 7.1% year over year from 2009, primarily driven by an increase in data sales. Our 2010 acquisition of a 49% interest in TekMate, our partner in providing managed IT services and professional services to our customers, accelerated our ability to layer on value-added services such as data hosting, video conferencing and IT-managed services on top of base connectivity. Despite a modest decrease of wireless revenue overall in 2010, increased penetration of data-centric devices in the wireless market, together with rapid growth of high-value wireless data average revenue per user which increased 53% from 2009, helped drive wireless results for the year, notwithstanding a loss in wireless customer numbers. Although the continuing, industry-wide, downward trend in legacy wireline business also impacted our revenue, focused execution resulted in operating cash flows, excluding swap termination costs of $11.1 million, which are at the highest levels since 2007. We returned an aggregate of $38.4 million to shareholders via cash dividend payments in 2010.

          Listed below are the key quantitative factors considered by the C&PC in its 2010 compensation decisions:

	•		We reported EBITDA results for 2010 of $126.5 million for the twelve-months ended December 31, 2010, compared with a 2010 EBITDA performance target of $124.6 million. Cumulative EBITDA results for the 2008 through 2010 three-year period was $340.0 million, compared to our target cumulative EBITDA for the period of $347.6. Despite exceeding annual EBITDA performance targets in both 2008 and 2010, the cumulative results fell short of the three-year cumulative EBITDA Company Performance Target due to lower than projected results in 2009.
	•		Total enterprise revenue reported for 2010 equaled $48.6 million, compared to the 2010 Company Performance Target of $53.7 million.
	•		Wireless revenue for the twelve-month period ending December 31, 2010 was $140.6 million, compared to the 2010 Company Performance Target of $143.6 million.

          As reported in the Summary Compensation Table below, the compensation of our NEOs was consistent with the results the Company reported for 2010. The C&PC applied a predetermined schedule to reduce the cash incentive award targets that were available to the NEOs based on actual results achieved with respect to the three Company Performance Targets, as reported above. Payments to NEOs were further adjusted for individual performance, as assessed by the C&PC, with the assistance of the CEO (except in the case of the CEO’s own compensation). The C&PC awarded three of our NEOs modest upward adjustments in their cash incentive payments based on their individual performance. Mr. Vadapalli earned an enhanced cash incentive due to improving operational performance of the Company. Mr. Wilson earned an enhanced award due to successfully refinancing the debt and providing long-term fiscal stability, and Mr. Williams earned an enhanced award due to

his efforts reconstructing a total compensation plan that addresses all stakeholder needs. Final 2010 cash incentive awards are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation table below.

          With respect to equity grants, the C&PC determined that based on the Company’s reported EBITDA results, one-third (1/3) of the annual short-term restricted stock units, granted to our NEOs in each of the three previous years, vested in March 2011. However, due to below target EBITDA results in 2009, the Company did not achieve long term EBITDA results that satisfied the cumulative Company Performance Target established for the years 2008 through 2010. Consequently, the C&PC determined that long-term restricted stock unit grants which were awarded in 2008 did not vest on an accelerated basis in 2010 in accordance with the conditions of the grants.

          Performance-Accelerated Restricted Stock Unit Grants in 2010

          The C&PC made new equity grants to each of our NEOs in July 2010. One-half of each grant was provided as performance-accelerated restricted stock units and one-half in the form of long-term performance-accelerated restricted stock units. For Ms. Pelletier, our CEO during 2010, the total target dollar value of the restricted stock unit grant was set by her 2008 employment agreement as equal to her total annual target cash compensation. Mr. Vadapalli’s amended employment agreement as COO, entered into in February 2010, provided for an annual target equity award valued at $550,000, one-half of which was granted as performance accelerated restricted stock units and one-half as long-term performance accelerated restricted stock units. The 2010 restricted stock unit awards to our other NEOs were generally determined as a percentage of the CEO’s restricted stock unit award, based on the relative level of responsibility of each of these NEOs as compared to the CEO, as determined in the judgment of the C&PC. Mr. Williams’ award of restricted stock units was pro-rated based on his start date with the Company of June 1, 2010, as provided in his employment letter.

          Oversight of the Executive Compensation Program

          Role of Compensation Consultants and Survey Data

          In general, the C&PC works with an independent compensation consultant to conduct an executive compensation study every other year. At the C&PC’s request, a compensation study was completed in the third quarter of 2010 by Frederick W. Cook & Co., Inc. (FW Cook, Inc.). FW Cook, Inc. is an independent consultant to the C&PC and provides no other consulting or other business or professional services to the Board, the Company or its management. The FW Cook, Inc. study was commissioned to provide the C&PC with an independent, competitive review of executive compensation levels, as compared to our peer companies, and also to provide recommendations on our pay structure going forward. The consultant’s review of the Company’s executive compensation program considered its effectiveness in supporting the Company’s business strategy, the current business and regulatory environment in which the Company operates, evolving corporate governance considerations, and recent accounting, tax and disclosure requirements.

          As part of the consultant’s study, FW Cook, Inc. recommended use of a new set of fifteen (15) peer companies broadly similar to our Company with respect to both industry type and size. This expanded group of peer companies is thought to be more representative of the complex and evolving data technology services provided by our Company than our previous peer group, and the larger size of the peer group (fifteen (15) as opposed to six (6) companies) also provides better comparative data. The six companies previously used as our peers (shown with an asterisk in the list below) were retained as comparators within the larger group of fifteen.

Our Company ranked roughly in the median of this peer group, both in terms of revenue range and market capitalization. The fifteen peer group companies considered by FW Cook, Inc., in its study are listed below.

AboveNet		Neutral Tandem
Atlantic Tele-Network		Ntelos*
Cbeyond		Premiere Global
Cincinnati Bell*		Shenandoah Telecom
Cogent Communications		Surewest Communications*
Consolidated Communications*		USA Mobility
General Communications*		Vonage Holdings
ITC Deltacom*

          When analyzing the peer group data used for reviewing the compensation of our executives, the C&PC analyzed and compared, among other metrics, type of operations, market capitalization, revenues, net income, EBITDA, total shareholder return, return on invested capital and return on equity, over the last fiscal year and cumulatively for the last three fiscal years, for each peer company.

          The C&PC reviewed the compensation packages of the executive officers of each of the peer group companies included in the FW Cook, Inc., study and compared them with the compensation of each of our NEOs with comparable duties and responsibilities. The purpose of reviewing such data regarding the peer group was for the C&PC to determine whether the compensation paid to our NEOs is generally competitive with that paid by peer group companies to their NEOs, recognizing that our compensation practices reflect that our NEOs operate in a more geographically remote market and manage a relatively more diverse portfolio of telecommunications services than do the executives of many of our peer companies.

          Based on the information provided by the consultant’s study, the C&PC determined that our NEOs’ current base salaries are below the median of the fifteen (15) peer companies. Performance-based annual target cash incentives generally represents a higher percentage of the total cash compensation for our NEOs, and target equity incentive grant values are generally at or above the median level compared to peers. As a result, our total target direct compensation is at or moderately above the median, but a higher percentage of our total compensation is at risk, providing an upside to our executives only if Company performance meets or exceeds expectations. The comparison of severance benefits offered to our executives showed that they are generally comparable to those of our peer companies, and other benefits and perquisites are more limited than those offered by our peers.

          Based on the results of the study, the consultant recommended some changes to our pay structure, particularly regarding the design of the equity component. Based on the results of its 2010 review of our executive compensation program, the C&PC decided to leave base salaries and target incentive compensation for our NEOs similar to or lower than the levels in 2010. The C&PC also approved several changes to our equity grant program commencing in 2011, which further increase the emphasis on pay-for-performance, in keeping with our overall compensation philosophy.

          Although the C&PC believes it is important periodically to review the compensation policies of a representative peer group, the C&PC also believes we must adopt compensation policies that incorporate our own business objectives, conditions, and culture. We face unique considerations in attracting executive talent to the remote Alaska labor market, meeting our Company’s specific hiring and retention goals, keeping our focus on our pay-for-performance principles, and the desirability of balancing short and long-term goals and results.

          Therefore, while the C&PC reviews peer data, the C&PC does not annually adjust the compensation paid to our NEOs based on the compensation policies of peer group companies and does not index the total

compensation of our NEOs or any element of their compensation against the peer group. We offer the compensation we believe is appropriate to attract, retain and incent our key executives in this highly competitive industry.

          Role of C&PC and CEO

          The C&PC determines the President and CEO’s compensation package in consultation with the independent members of our Board. Management does not provide input in the determination of the CEO’s compensation.

          Ms. Pelletier, our CEO during 2010, developed and made recommendations regarding the compensation of the NEOs who reported directly to her and also made recommendations as to their individual performance goals. Management also provides peer group information to the C&PC related to the compensation of our executives. The CEO developed and recommended the compensation packages for our other NEOs, but the C&PC has the ultimate authority to approve or modify management’s recommended compensation packages. No changes in compensation packages were made in 2010 for Messrs. Steinberg or Wilson.

          In February 2010, the C&PC approved an amended employment agreement with Mr. Vadapalli that provided an increase in his total target cash compensation. The increase in Mr. Vadapalli compensation package reflected his continuing strong performance and his elevation to assume the expanded role and responsibilities of COO and Executive Vice President. In February 2011, the C&PC approved a new employment arrangement with Mr. Vadapalli, who became our President and CEO effective February 1, 2011. The CEO compensation package was negotiated based on the recommendations of and with the assistance of the C&PC’s independent compensation consultant, FW Cook, Inc. The Company entered into an employment arrangement with Mr. Williams in May 2010, and Mr. Williams joined the Company as our Chief Human Resource Officer in June 2010.

          Other Policies, Practices, and Judgments Affecting our Executive Compensation

          Policy Regarding Security Ownership By Management

          We have adopted minimum share ownership requirements because we believe that management will more effectively pursue the long-term interests of shareholders if they are shareholders themselves. The C&PC reviews our share ownership requirements regularly and makes changes, as needed, to bring our policy into line with emerging market practice. Our policy requires each executive, except the CEO, to accumulate and hold a number of shares of common stock having value of at least one-and-a-half times (1.5x) the executive’s base salary. The CEO is expected to hold shares of common stock equal to at least three (3) times base salary. Our NEOs have five (5) years to achieve the prescribed ownership levels, and all our executives are in compliance with this requirement. We do not impose specific holding periods for equity grants to our executives, but our executives must at all times hold sufficient stock to ensure compliance with our minimum stock ownership requirements.

          Relative Levels of Compensation among NEOs

          Generally, the elements of compensation described earlier apply to all of our NEOs. Our CEO is the most highly paid of our NEOs, reflecting the overarching level of responsibility. Ms. Pelletier had the ultimate responsibility for the strategic direction of the Company in 2010, and a more visible role than our other NEOs. As part of a leadership transition plan memorialized in the amendment to her employment agreement entered into on December 1, 2010, Ms. Pelletier moved to a transition officer role on February 1, 2011, and terminated her employment with the Company upon expiration of her employment agreement on April 1, 2011.

          The second most highly compensated NEO in 2010 was our COO, Anand Vadapalli. Mr. Vadapalli was elevated to this new position in October 2009, but there was no change to Mr. Vadapalli’s compensation at that time. In February 2010, his employment agreement was amended to reflect his new role as COO. Mr. Vadapalli’s increased compensation in 2010 reflected his substantially expanded role in managing all the day-to-day operations of the Company. Effective February 1, 2011, Mr. Vadapalli was elevated to the position of President and CEO of the Company, succeeding Ms. Pelletier, in which role he is responsible for overseeing all management functions, and he has also been appointed as a member of the Board of Directors. His

compensation package was further increased at that time, reflecting his ultimate responsibility for strategic direction and overall management of the Company.

          Other NEOs received lower total compensation than the CEO and COO. As of December 31, 2010, our CFO, David Wilson, was the third most highly compensated NEO, followed by the General Counsel, Leonard Steinberg, and the Chief Human Resource Officer, Foster Williams. Mr. Wilson resigned from his position with the Company effective April 30, 2011, and he has been replaced by a new CFO, Mr. Wayne Graham, who joined the Company on April 1, 2011.

          Wealth Accumulation

          The C&PC does not believe that wealth accumulation, other than through our equity compensation program should be a significant consideration when establishing our compensation policies. Our NEOs do not have a substantial benefit from their participation in our defined contribution or benefit plans. A majority of our executives’ retirement savings consists of the executive’s own contributions and accumulated retirement savings from principally other companies’ retirement plans earned over lengthy careers. We believe that it would be inconsistent with the purpose of our executive compensation program, which is to motivate and reward ongoing performance, to make decisions about current compensation based on the NEOs’ accumulated savings and investment returns, whether or not under our Company plans.

          Consideration of Equity Compensation Practices on Shareholders

          In order to assess the potential dilution to our shareholders, the C&PC may take into account the total outstanding but unexercised equity awards when determining the total number of shares that would be subject to any new equity award. In addition, the C&PC may consider the number of shares that remain subject to outstanding but unvested equity awards in determining whether any additional grants of equity awards should be made. The C&PC does not take into account an individual executive’s holdings of vested but unexercised awards in determining additional equity awards to the executive. The C&PC also does not take into account the value realized by an executive during a fiscal year from the exercise of equity awards granted during a prior year. The C&PC believes that value realized by an executive from the exercise of any such equity award relates to services provided during the year of the grant or of vesting, and not necessarily during the year of exercise.

          In 2009, when our Board proposed to add new shares to our 1999 Stock Incentive Plan, concerns were raised by some shareholders regarding the rate of our equity grants to Company employees. The C&PC has sought to address those concerns through a series of compensation changes.

          First, in July 2009, the C&PC adopted a new stated policy that the Company will not grant employee equity awards under our 1999 Stock Incentive Plan, as amended, that exceed two percent (2%) of the three-year average twelve-month outstanding common stock between July 10, 2009 and December 31, 2012. As of April 1, 2011, the Company is meeting this commitment, and it intends to continue doing so. We have carefully calibrated our equity award levels to conform to the policy adopted by the C&PC; however, our calculation of the rate of employee equity awards may differ from some other calculations which may encompass different time periods or employ various multipliers.

          In furtherance of the stated policy, the C&PC awarded smaller equity grants overall to our NEOs in 2010 as compared to 2009. In particular, special awards of time-vested restricted stock units, SSARs and Performance Stock Units, were granted to our NEOs in 2008 and 2009, under the terms of previously amended employment agreements with our CEO, CFO and the Executive Vice President of Operations and Technology, to ensure retention of these key leaders or to provide additional incentives to achieve critical milestones in readying and launching our enterprise line of business. As of April 1, 2011, all of these special equity awards have vested or been forfeited and no new option, SSAR or PSU awards were made in 2010.

          Also, as reported above, in 2010 the C&PC engaged an independent compensation consultant and completed a compensation study, including a peer comparison study. The study led to the redesign of our executive compensation program, effective in 2011, to, among other things: provide that two-thirds of our annual NEO equity awards will be made in the form of PSU awards, which only vest if Company Performance Targets are achieved. This change will further reduce our rate of incentive awards starting in 2011. The C&PC will also

closely monitor the effects of its recent executive compensation changes and will evaluate our equity grant program again in 2012 to determine whether further corrective actions would be beneficial.

          Finally, as explained in more detail in Proposal 2, below, the Board has proposed a new 2011 Incentive Award Plan for shareholder approval at our annual meeting, which does not seek the authorization of any additional shares for incentive award purposes. If approved by shareholders, the 2011 Plan would eliminate certain undesirable provisions of our 1999 Plans, adopt more currently favored requirements regarding change-in-control and clawbacks, among other items, and transfer all remaining available shares previously authorized under the 1999 Plans to the 2011 Plan so that all future equity awards would be made in accordance with the 2011 Plan’s terms and conditions that are more protective of shareholders’ interests.

          Section 162(m) of the Internal Revenue Code

          Section 162(m) generally limits to one million dollars ($1,000,000) the tax deductibility of annual compensation paid to certain officers. Performance-based compensation may, however, be excluded from the limit so long as it meets certain requirements. While the C&PC retains flexibility, when practicable we seek to design our compensation plans and programs so as to allow the Company to deduct compensation expense. Our 2011 Incentive Award Plan proposed for shareholder approval at the annual meeting is intended to provide the shareholder approval necessary for us to seek to structure compensation arrangements that qualify as performance-based compensation and are exempt from the $1 million deductibility limit set forth in Section 162(m).

          Policies and Practices Regarding Equity Awards

          Under our policy, all equity grants to our NEOs are made at a regularly scheduled meetings of the C&PC. In addition, a Non-Executive Equity Compensation Subcommittee has been delegated authority by the C&PC to make equity compensation grants at regularly scheduled meetings, but only to employees who are not executive officers.

          Executive Compensation “Clawback” Reimbursement Policy

          Our 2010 Officer Severance Policy approved by the C&PC includes a new executive compensation “Clawback Policy”. This Clawback Policy provides that the Board of Directors or any committee of the Board may require an executive officer to whom the policy applies to return to the Company any cash incentive payments or equity awards (or the value thereof) that were provided to the officer on the basis of Company or individual performance which is later discovered to be based on misconduct or unethical behavior that results in the Company having to file a material restatement of the Company’s financial results. New employment agreements entered into with our CEO and CFO in 2011, after enactment of the Dodd-Frank Act, additionally contain expanded clawback language that requires reimbursement for payments made on the basis of financial results later found to require an accounting restatement, regardless of any misconduct on the part of the executive.

          Change in Control and Other Severance Provisions

          Change-in-control severance provisions apply to each of our NEOs, either through the terms of their individual employment agreements or the Company’s 2010 Officer Severance Policy, which is expressly applicable under the terms of some of our NEOs’ employment arrangements. The primary purpose of these change-in-control protections is to align executive and shareholder interests by enabling our NEOs to assess possible corporate transactions without regard to the effect such transactions could have on their employment with the Company. In seeking to adhere to best compensation practices, the change-in-control provisions applicable to our NEOs generally avoid a “single trigger” for receipt of severance benefits in the event of a change in control. Double triggers (a change-in-control event plus the Company’s termination of the executive without cause, or resignation by the executive for good reason, within specified time periods from the change-in-control) are normally required for receipt of change-in-control benefits (except, as described below, for equity grants made under our 1999 Stock Incentive Plan). The amount of change-in-control benefits provided for our executives is also limited to amounts that the C&PC believes are reasonable in the event of the occurrence of the circumstances specified for receipt thereof. The specific change-in-control severance provisions applicable to each NEO are discussed in more detail below under the heading: “Employment Arrangements and Potential Payments upon Termination or Change in Control.”

          To eliminate an inconsistency between these change-in-control provisions and our 1999 Stock Incentive Plan, the C&PC is recommending shareholder approval this year of a new 2011 Incentive Award Plan to replace the Company’s 1999 Employee Stock Incentive Plan and 1999 Non-Employee Director Stock Compensation Plan (the “1999 Plans”). Among other changes, the proposed 2011 Incentive Award Plan eliminates language in the older plans which include “single-trigger” change in control provisions applicable to equity grants. The C&PC has recommended this change because it believes our incentive award plan should be made consistent with more currently-favored pay practices. The changes proposed in our 2011 Incentive Award Plan are described further in Proposal 2, below.

          The 2010 Officer Severance Policy also made other substantive modifications to our prior 2008 Officer Severance Policy that are beneficial to shareholders’ interests. For officers to whom it applies, it eliminates the severance benefit of accelerated or post-termination vesting of unvested equity compensation, except in the case of a change in control. It also amends the definition of termination for “cause” by adding language to provide that ineffectual job performance or failure to perform one’s job with minimal effectiveness is considered “cause” for termination, and by permitting termination for “cause” for conduct which is “negligent” or “harmful to the Company.” The “good reason” definition has been modified in the 2010 Officer Severance Policy to provide that a significant reduction in title is “good reason” to resign, but the Company may modify an officer’s assigned responsibilities or reassign employees reporting to the officer without those changes, in and of themselves, constituting “good reason.”

          Tax Gross-ups

          We do not provide tax gross-ups to any of our current NEOs, and the C&PC does not plan to include tax gross-ups in any future employment arrangements.

          Perquisites and Other Fringe Benefits

          Perquisites provided to our NEOs are very limited in scope. We generally provide an automobile allowance to all our NEOs in order to assist them in fulfilling their responsibilities to the Company and to compensate them for use of their own automobile in the performance of services for us. Our NEOs who have joined us from locations outside of Alaska are generally reimbursed for a portion of their moving expenses due to the high costs of relocating to and from Alaska. (We have extended relocation benefits to certain other key officers and employees relocating from out-of-state to accept positions with us, as well.) Our NEOs also are generally eligible for the same employee discounts available to all our employees and they are eligible to participate in the same broad-based Company retirement, 401K, health and welfare, and employee stock purchase plans available to all or substantially all of our employees.

          The following tables lists our perquisites and identifies those that we offer to our executives and employees.

Type of Perquisites		CEO		NEOs		Full-Time Employees
Employee Discounts		X		X		X
Moving Expenses		X		X		Some
Automobile Allowance		X		X		Some
Legal Reimbursement		X		Not Offered		Not Offered
Spousal Travel Reimbursements		Not Offered		Not Offered		Not Offered
Financial Planning Allowances		Not Offered		Not Offered		Not Offered
Country Club Memberships		Not Offered		Not Offered		Not Offered
Personal Use of Company Aircraft		Not Offered		Not Offered		Not Offered
Security Services		Not Offered		Not Offered		Not Offered
Deferred Compensation Plan		Not Offered		Not Offered		Not Offered
Defined Benefit Supplemental Executive Retirement Plan		Not Offered		Not Offered		Not Offered

          Compensation and Personnel Committee Report

          The Compensation and Personnel Committee of the Board of Directors operates under a written charter and is comprised entirely of directors meeting the independence requirements of Nasdaq. The Board established this C&PC to discharge the Board’s responsibilities relating to compensation of the Company’s CEO and each of the Company’s other executive officers. The C&PC has overall responsibility for decisions relating to all compensation plans, policies, and benefit programs as they affect the CEO and other NEOs. The C&PC has reviewed and discussed the information appearing above under the heading “Compensation Discussion and Analysis” with management and, based on that review and discussion, has recommended to the Board of Directors that the “Compensation Discussion and Analysis” section be included in this proxy statement.

Compensation and Personnel Committee Interlocks and Insider Participation

          Our C&PC is comprised of Messrs. Donahee and Rogers. Neither member of the C&PC is or was our officer or employee or has had any relationship with us requiring disclosure pursuant to Item 404 of Regulation S-K. No member of the C&PC is an executive officer of another entity for which any of our executives serves as a C&PC member. None of our executive officers served as a director for a company that employs as an executive officer any of our directors.

Compensation Tables

Summary Compensation Table

     The table below sets forth a summary of the compensation we incurred for our CEO, CFO, each of the three additional most highly compensated executive officers who served in such capacities as of December 31, 2010.

																										Change
																						Non-Equity				in
														Stock				Option				Incentive Plan				Pension				All Other
Name and Principal						Salary				Bonus				Awards				Awards				Compensation				Value				Compensation				Total
Position		Year				($)				($)				($)(1)				($)(2)				($)(3)				($)(4)				($)(5)				($)
Liane J. Pelletier			2010				500,000				—				966,297				—				478,500				27,004				12,000				1,983,801
President and			2009				500,000				—				622,700				540,364				309,375				20,893				24,245				2,017,577
Chief Executive Officer			2008				500,000				—				3,657,000				844,164				553,500				293,436				16,210				5,864,310
David Wilson			2010				275,000				—				339,378				—				258,390				32,996				—				905,764
Executive Vice President			2009				274,329				—				484,013				299,498				155,000				366,236				—				1,579,076
Chief Financial Officer			2008				250,000				—				655,528				—				297,000				—				—				1,202,528
Anand Vadapalli			2010				339,328				18,750				459,369				—				322,987				254,901				16,215				1,411,550
Executive Vice President,			2009				275,482				—				234,832				—				155,000				—				18,750				684,064
Chief Operations Officer			2008				249,540				—				917,475				293,789				297,000				—				20,855				1,778,659
Leonard Steinberg			2010				220,000				—				339,378				—				191,400				17,774				—				768,552
Vice President,			2009				220,000				—				213,477				—				124,000				11,231				—				568,708
General Counsel and			2008				220,000				—				433,589				—				237,600				53,314				—				944,503
Corporate Secretary
Foster Williams			2010				121,847				50,000				197,976				—				120,582				—				24,695				515,100
Chief Human Resources			2009				—				—				—				—				—				—				—				—
Officer			2008				—				—				—				—				—				—				—				—

Grants of Plan-Based Awards

     The following table sets forth each grant of an award including equity and non-equity awards made to each NEO during the year ended December 31, 2010. Actual future payouts of non-equity incentive plan awards may vary from the estimates set forth below.

																										Exercise				Grant Date
																		Number				Number of				or base				Fair Value of
						Estimated Future Payouts Under												of Shares				Securities				price of				Stock and
						Non-Equity Incentive Plan Awards(1)												of Stock				Underlying				option				Option
		Grant				Threshold				Target				Maximum				or Units				Options				awards				Awards
Name		Date				($)				($)				($)				(#)				(#)				($/Sh)				($)
Liane J. Pelletier			—				—				550,000				1,650,000				—				—				—				—
			1/5/2010				—				—				—				6,266	(2)			—				—				47,559
			7/12/2010				—				—				—				129,400	(3)			—				—				918,738
David Wilson			—				—				275,000				550,000				—				—				—				—
			7/12/2010				—				—				—				47,800	(3)			—				—				339,378
Anand Vadapalli			—				—				275,000				550,000				—				—				—				—
			7/12/2010				—				—				—				64,700	(3)			—				—				459,369
Leonard Steinberg			—				—				220,000				440,000				—				—				—				—
			7/12/2010				—				—				—				47,800	(3)			—				—				339,378
Foster Williams			—				—				220,000				440,000				—				—				—				—
			7/12/2010				—				—				—				27,884	(3)			—				—				197,976

Outstanding Equity Awards at Fiscal Year-End

     The following table sets forth unexercised options; restricted stock units that have not vested; and equity incentive plan awards for each NEO outstanding as of December 31, 2010.

		Option Awards																Stock Awards
																										Incentive Plan
																										Awards:
																										Number of				Equity Incentive Plan
		Number of				Number of																				Unearned				Awards: Market or
		Securities				Securities												Number of				Market Value				Shares, Units				Payout Value of
		Underlying				Underlying												Shares or Units				of Shares or				or Other				Unearned Shares,
		Unexercised				Unexercised				Option								of Stock That				Units of Stock				Rights That				Units or Other Rights
		Options				Options				Exercise				Option				Have Not				That Have Not				Have Not				That Have Not
		(#)				(#)				Price				Expiration				Vested				Vested				Vested				Vested
Name		Exercisable				Unexercisable				($)				Date				(#)				($)(1)				(#)				($)
Liane J. Pelletier			200,000				—				4.50				10/6/2013				—				—				—				—
			250,000				250,000	(2)			9.38				1/2/2014				—				—				—				—
			500,000				—				12.56				9/22/2013				—				—				—				—
			—				—				—				—				12,070	(7)			133,977				—				—
			—				—				—				—				24,445	(8)			271,340				—				—
			—				—				—				—				36,667	(9)			407,004				—				—
			—				—				—				—				58,635	(10)			650,849				—				—
			—				—				—				—				58,635	(11)			650,849				—				—
																			64,700	(12)			718,170
			—				—				—				—				64,700	(13)			718,170				—				—
David Wilson			183,332				91,668	(3)			9.16				1/5/2014				—				—				—				—
		—				—				—				—				—				—				—				—
			—				—				—				—				4,061	(7)			45,077				—				—
			—				—				—				—				8,222	(8)			91,264				—				—
			—				—				—				—				12,333	(9)			136,896				—				—
			—				—				—				—				10,008	(14)			111,089				—				—
			—				—				—				—				23,865	(10)			264,902				—				—
			—				—				—				—				23,865	(11)			264,902				—				—
			—				—				—				—				23,900	(12)			265,290				—				—
			—				—				—				—				23,900	(13)			265,290				—				—
Anand Vadapalli			275,000				—	(4)			9.09				12/19/2013
			—				—				—				—				834	(15)			9,257				—				—
			—				—				—				—				4,061	(7)			45,077				—				—
			—				—				—				—				8,634	(8)			95,837				—				—
			—				—				—				—				12,950	(9)			143,745				—				—
			—				—				—				—				23,865	(10)			264,902				—				—
			—				—				—				—				23,865	(11)			264,902				—				—
			—				—				—				—				32,350	(12)			359,085				—				—
			—				—				—				—				32,350	(13)			359,085				—				—
Leonard Steinberg			—				4,167	(5)			7.00				1/4/2011				—				—				—				—
			—				4,166	(6)			8.00				2/20/2012				—				—				—				—
			—				—				—				—				4,061	(7)			45,077				—				—
			—				—				—				—				8,222	(8)			91,264				—				—
			—				—				—				—				12,333	(9)			136,896				—				—
			—				—				—				—				21,695	(10)			240,815				—				—
			—				—				—				—				21,695	(11)			240,815				—				—
			—				—				—				—				23,900	(12)			265,290				—				—
			—				—				—				—				23,900	(13)			265,290				—				—
Foster Williams			—				—				—				—				13,942	(12)			154,756				—				—
			—				—				—				—				13,942	(13)			154,756				—				—

Option Exercises and Stock Vested

     The following table sets forth information regarding stock options exercised by, and the shares of restricted stock units that vested for, each of the NEOs in 2010. The value of the shares acquired upon exercise of stock options is based on the difference between the closing price of the shares on the exercise date and the exercise price. The value of restricted stock units realized is based on the closing price of the shares on the vesting date.

		Option Awards								Stock Awards
		Number of
		Shares				Value				Number of				Value
		Acquired				Realized				Shares				Realized
		on				on				Acquired on				on
		Exercise				Exercise				Vesting				Vesting
Name		(#)				($)				(#)				($)
Liane J. Pelletier			—				—				42,474				363,562
David Wilson			100,000				485,000				22,186				181,251
Anand Vadapalli			—				—				23,097				221,477
Leonard Steinberg			10,667				37,515				12,179				98,893
Foster C. Williams			—				—				—				—

Pension Benefits

     The table set forth below includes, for each NEO, the number of years of service credited to the NEO under the AEPP as of December 31, 2010. This table includes our estimates of the actuarial present value of each NEO’s accumulated benefit under the plan.

						Number of				Present
						Years				Value of				Payments
						Credited				Accumulated				During Last
		Plan				Service				Benefit				Fiscal Year
Name		Name				(#)				($)				($)
Liane J. Pelletier		AEPP					7				341,333				—
David Wilson		AEPP					7				399,232				—
Anand Vadapalli		AEPP					5				254,901				—
Leonard Steinberg		AEPP					10				393,371				—
Foster C. Williams		AEPP					—				—				—

     The AEPP is a non-contributory, multi-employer defined benefit retirement plan administered by a board of trustees representing the member participants. We make contributions on behalf of our employees in accordance with schedules based on wage rates and job classifications, but we do not include the present value of accumulated benefits under the AEPP in our audited financial statements. Participants, including each of our NEOs, receive a monthly benefit upon retirement, payable for life based on the contributions made on the employee’s behalf. None of our current NEOs are eligible for normal retirement at the present time.

Employment Arrangements and Potential Payments upon Termination or Change in Control

     We have entered into employment agreements with each of our NEOs. These arrangements are summarized below.

     Anand Vadapalli

     We entered into a new employment agreement (“2011 Agreement”) with Anand Vadapalli, as President and Chief Executive Officer of the Company, effective February 1, 2011. Mr. Vadapalli was previously our COO and Executive Vice President during 2010. The 2011 Agreement with Mr. Vadapalli provides for a three-year employment period with an annual base salary of four hundred fifty thousand dollars ($450,000), target annual cash incentive compensation of not less than his base salary, and eligibility to receive annual equity grants, which the Agreement provides should guided by the principle that equity awards should not be less than twice (2x) the value of Mrs. Vadapalli’s base salary. The C&PC retains discretion to set the actual amounts and types of equity awards each year.

     Other benefits include paid-time off, participation in the Company’s health and welfare plans, 401(k) retirement investment plan, employee stock purchase plan and pension plan, all of which benefits are generally available to all or substantially all of our employees.

     Under Mr. Vadapalli’s 2011 Agreement, upon a termination of his employment by the Company “without cause” or resignation by Mr. Vadapalli for “good reason,” as those terms are defined in the 2011 Agreement, Mr. Vadapalli is entitled to receive severance benefits. His severance benefits include a cash payment of nine hundred thousand dollars ($900,000); a cash incentive payment based on achievement of annual performance objectives for the last full year of his employment (if not previously paid), plus a prorated cash incentive payment for the portion of the year he was employed during the last partial year of his employment; continued vesting of equity awards generally in accordance with the terms of the individual equity award agreements (except that, for performance-based awards, the award amount is to be prorated based on the C&PC’s determination of the Company’s performance measured against previously-established Company Performance Targets applicable to the individual awards as of the date of termination of his employment); monthly payments for up to one year to cover federal medical COBRA premiums, in certain circumstances; and reimbursement for relocation expenses of up to fifty thousand dollars ($50,000) and realtor commissions on the sale of his residence of up to fifty thousand dollars ($50,000), subject to certain conditions. In the event his employment is terminated by the Company “without cause” or Mr. Vadapalli resigns for “good reason” in connection with a change-in-control of the Company, severance payments include a cash payment of one million eight hundred thousand dollars ($1,800,000), plus the cash incentive payments described above; accelerated vesting of all equity awards made after the date of the employment agreement (awards made prior to the agreement shall vest only in accordance with the terms of the individual award agreements); monthly payments equal to COBRA health insurance payments for up to eighteen months, plus another six months at the average rate paid for the prior eighteen months, under certain circumstances; and the same relocation reimbursements as described above.

     The following table sets forth the payments and benefits Mr. Vadapalli would have received, assuming a termination of his employment on December 31, 2010 in the following scenarios, had his 2011 Agreement been in effect on that date. The benefits he would receive under this 2011 Agreement are set forth here because they are the most current applicable benefits and would in any case exceed the benefits he would have received in his prior position as COO of the Company.

										Value of
										Accelerated
						Target				Stock,
		Base				Cash				Options and
Termination Event		Salary				Incentive				SSARs				Benefits				Total
Company without cause or employee for good reason		$	900,000				450,000				—			$	120,995	(2)		$	1,470,995
Death			—				450,000				—				—				—
Disability			—				450,000				—				—				—
Change- in-control		$	1,800,000				450,000			$	1,541,890	(1)		$	141,989	(3)		$	3,933,879	(4)
Company with cause or employee without good reason			—				—				—				—				—