In investing, a ‘moat’ commonly refers to a company’s ability to maintain its competitive advantages to protect its long-term profits and market share. Elon Musk thinks that “moats are lame”* and ripe for disruption, however, for ‘commodity’ products such as internet and television distribution, a moat can be crucial.
In the case of Charter Communications (NASDAQ:CHTR) in the United States, the company dug their own moat and laid cable in it. Charter is the second largest cable company providing 27 million households (out of the 50 million households ‘passed’) with broadband internet, television and telephone services.
Charter is a toll-road on the internet highway and is the major broadband provider in most of the regions that it operates giving the company a monopoly-like structure and ability to raise prices an average 5% per annum, which doesn’t sound very “lame” to us.
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*Tesla Earnings Call 1st Quarter 2018