Even Alex Keaton Would Love This Rule : Television: If the FCC does away with regulations curbing network ownership of TV series, it will reduce diversity and consumer choice.

Louie DePalma, Alex Keaton, Archie Bunker and Bart Simpson spent a lot of time on network television, but it wasn’t the networks that created and nurtured these memorable small-screen characters. “Taxi,” “Family Ties,” “All in the Family,” and “The Simpsons” all of came from independent producers, a species threatened by proposed changes in the rules about who can profit from syndication--the reruns of popular TV series.

The so-called “Financial Interest and Syndication Rule” prohibits the networks from demanding ownership rights to entertainment series as a condition of showing them on the network, so that when the shows go into reruns--into syndication--the production companies make the long-term profits that finance more new series. The Federal Communications Commission established the rule 21 years ago to promote competition and diversity in the television marketplace, and it has achieved its purpose.

Why would the FCC consider repeal of this rule? Well, as Mr. Rogers might ask, “Can you say C-B-S, N-B-C, and A-B-C?” Each has relentlessly lobbied the FCC in favor of repeal of the financial and syndication rules, with a spare-no-costs, take-no-prisoners campaign. In response, individual producers of TV programming have asked for careful modifications. The commission is poised to make its final judgment.

History makes clear that, without the rule, the networks will engage in anti-competitive extraction of show ownership rights without making a fair investment or taking any financial risk. Facing this situation, no small-businessperson would have a chance in the TV marketplace.

The networks have overwhelming power granted by the federal government in 1952--a product of its division of the valuable and scarce radio spectrum. Yet, with no reference to their federal parentage, these three giant corporations now want total repeal of of the financial interest and syndication rules, just as S&L; operators in the 1980s sought and received blanket freedoms coupled with continued governmental protection. To those who argue that cable TV has badly damaged the networks’ market power, imagine waging a national television advertising campaign without them.

So, without these rules, the networks would be free to leverage their government grant to control, without limit, the markets for both first-run and rerun television programs. Independent producers would be subjected to strong-arm, take-it-or-leave-it bargaining tactics. The result would be the loss of a thriving industry of production companies, large and small, run by entrepreneurial and fiercely independent men and women--such as Thomas Carter (“Equal Justice”), Gary David Goldberg (“Family Ties”), Marion Rees (Hallmark Hall of Fame “Decoration Day”), and James L. Brooks (“Taxi” and “The Simpsons”). With the loss of this competitive industry, television viewers would lose choices in entertainment programming.

It is also no small financial matter to California, home to most of the nation’s independent producers.

Yet, there are some who are beguiled by the semantics of the networks. Because the advocates of repeal characterize it as “deregulation,” some knee-jerk devotees of free-market economics swallow whole the characterization but fail to ask the vital question: Does what is being called “deregulation” actually increase competition to the benefit of the consumer, or does it instead operate to decrease competition?

Simply labeling a beneficial rule “regulation” does not make it evil if in fact it creates competition. In such a case, regulation is a valuable tool that serves the viewing public well because it is used to protect the marketplace. This is critical in the case of natural monopolies, such as public utilities, and applies as well when a government grant of privilege confers so dominant a market share. Such is the case in broadcast television. The ultimate conservative, Alex Keaton, would agree with me here.

The rule helped the television marketplace grow many times over--from 70 independent TV stations before the rule to more than 300 stations today, and from fewer than 50 prime-time producers in 1970 to more 200 independents. Indeed, had it not been for the financial and syndication rules, the new Fox Network would have had no stations to organize and no market from which to purchase shows.

The FCC is about to consider a compromise plan proposed by Commissioner Andrew Barrett that simplifies the present system while retaining many of its pro-competitive effects. It would allow the networks to syndicate shows that they own entirely, but limit such shows to 40% of the prime-time schedule. It may also limit “option periods” during which networks can maintain anti-competitive control over a show. On balance, this could allow an even more competitive marketplace to develop for certain types of television programs. With careful refinements, the plan can fully meet the legitimate concerns of the most vulnerable small producers.

On the merits, as one who has been actively involved in this issue for more years than General Electric (which owns NBC) and Loews (which controls CBS) have been in the broadcast business, and as governor of the state that encompasses so much of the TV and film community, I am confident that the FCC will see through the lobbyists’ smoke. The Barrett plan is based on the recognition that government has a responsibility to promote competition, diversity, and international competitiveness.