Choice Abounds, Let Networks Back In : The rule limiting ownership of shows by the Big Three creates a protected market for a handful of producers.

American television has lots of vices, but too few viewing choices is not one of them. We’ve got three major networks, and a fourth (Fox) is emerging. Nearly two-thirds of American homes get cable TV. If you don’t like any of that, you can pop a cassette into your VCR. The idea that most Americans remain prisoners of the three major networks is laughably outdated.

What’s weird, then, is that we’re still punishing the networks for power they lost long ago. In 1970, the Federal Communications Commission prohibited ABC, CBS and NBC from owning most prime-time entertainment programs (such as “Roseanne”) and from selling the programs abroad or for reruns on local stations. The idea was to spur new programming sources and to prevent the networks from denying reruns to independent stations. With today’s diversity, the restrictions are unwarranted. The FCC is reviewing the rule and should repeal it.

Naturally, the rule’s beneficiaries object. They’re mainly independent TV producers and the eight large Hollywood studios, which produce or have a stake in 75% of prime-time shows. The FCC rule gives them a protected market for network programs. So this is a megabuck quarrel.

Consider “The Cosby Show.” Its syndication rights for off-network reruns were sold for nearly $800 million, estimates Paul Kagan Associates, a media research firm. The producers, not NBC--the network that runs Cosby--got rich, and General Electric, NBC’s owner, is livid.

But there’s more to this dispute than money. The basic competition in television today pits over-the-air broadcasting against cable. The FCC penalizes over-the-air broadcasting by lowering its profitability. The less profitable the networks, the less they can pay for top-flight entertainment programs, movies and sports events. Over time, more good programming will move to cable.

“There’s no sense handicapping the networks,” says Henry Geller, a respected communications expert in Washington.

Between 1970 and 1989, the networks’ share of the prime-time audience dropped from 90% to 64%. In the same period, the number of independent stations jumped from 90 to 339, creating--along with cable--another big market for TV programs. Many hits now don’t come from the major networks: for example, “The Simpsons” (on Fox) or Arsenio Hall’s evening talk show.

If the FCC dropped its rule, the networks would own and produce more prime-time entertainment programs (news and sports aren’t covered by the rule). So what? Hollywood’s complaint is that diversity and creativity would suffer. This argument rings hollow. Fox can now legally produce all its programs because it isn’t covered by the FCC’s rule. Still, Fox produces only about 40% of its programs. Its biggest hit (“Married with Children”) comes from an outside producer.

Without diverse programming, the networks won’t get enough good ideas to hold on to their shrinking audiences. Every year, the networks introduce new series. Most flop. Failures are expensive, but the few successes are blockbusters.

That’s why the best writers and producers will always be well-rewarded. Yet independent producers--who often collaborate with major studios--say that a change in the FCC rule will hurt them by putting them at the networks’ mercy. Maybe. But a rule change might also help by triggering a bidding war between studios and networks for creative talent.

It’s not the FCC’s job to determine whether an independent producer makes $2 million or $200 million. Nor should the FCC protect the major studios, which are increasingly foreign-owned.

Changing the FCC rule wouldn’t create better TV. Mostly, it would re-divide the economic pie. Repeal would increase the value of the networks. Some big network investors might sell and reap a windfall. But that’s no argument for inaction. Everyone’s greedy in this dispute, and no one’s greed is morally superior to anyone else’s.

You can argue that the FCC’s rule succeeded in fostering competition (more independent stations) or that it was overtaken by new technologies (cable and VCRs). No matter. All it does now is create protected markets and undermine over-the-air TV. It deserves a quick burial.