Telecommunication Services
While most other sectors lag, telecommunications services has given a big boost to productivity in Germany and France. Germany has led the way in fixed-line services while France holds the advantage in mobile services labor productivity, where regulation has stifled growth in the U.S.
German Fixed-Line Surge
Liberalization and privatization, resulting in intensified competition and increased shareholder pressure, have been the key factors in a German surge in fixed-line productivity (Exhibit 1).
Deutsche Telekom responded to these changes by cutting call tariffs, shedding excess labor, and developing new services. With fewer workers handling more calls, productivity jumped significantly. The tremendous development of ISDN lines, boosted by a pioneering marketing approach, also helped.
French Mobile Leadership
Meanwhile, France set its sights on the mobile industry (Exhibit 2), with remarkable success. In 2000, France had a 43 percentage point labor productivity advantage over Germany and stood at more than twice that of the U.S.
While penetration rates for mobile phones were similar in Germany and France over the 1990s, the French used their phones far more: 62 minutes/month in Germany versus 120 minutes/month in France in 2000. There are many reasons, including differences in pricing complexity as well as cultural differences in mobile consumer behavior.
France also outpaces the U.S. where a regional licensing approach led to the fragmentation of the industry. Small operators in America cannot reap the economies of scale in the same way as their counterparts in the European countries.
Closing the Gaps
All three countries can improve their productivity performance: France must make further operational improvements in fixed-line services; the U.S. mobile services market needs to consolidate; and players in the German mobile market need to find ways to further stimulate demand. Launch this chapter (PDF - 446 KB)
