ox Broadcasting Co., the upstart fourth television network that has given the world such immortal characters as Bart Simpson and Al Bundy, now is giving the rest of the television industry fits.

Dismissed as an expensive pipe dream when it was launched three years ago, Fox's clout in Hollywood is now so great that competitors claim it has used its economic muscle to reshape the television industry to its own advantage. The intra-industry sniping has even broken out into a lawsuit by one major producer, Walt Disney Co. As its rivals would have it, Fox is broadcasting's bully, not its Wunderkind.

That Fox has attracted such venom is testament to its breathtakingly swift rise and carefully tended image as the industry outsider. After racking up operating losses just shy of $100 million in 1987 with stinkers like "Werewolf" and "Karen's Song," Fox produced profits of $35 million last season and three bona fide hits: "The Simpsons," "Married ... with Children" and "In Living Color."

Last month, on the strength of its anything-that-sticks mix of rowdy comedies, one-hour dramas and "reality" programs, Fox came within eight "audience share" points of longtime leader NBC. The network's overwhelming appeal to young viewers -- "Fox could put on Lawrence Welk and it would skew young," said Paul Schulman, a network media buyer -- helped it sell $550 million worth of commercial time on its new fall schedule.

That is still less than NBC (which collected an estimated $1.5 billion), ABC ($1.4 billion) or CBS ($900 million). But consider that Fox will air only 12 hours of prime time programming over five nights a week starting next month, compared with 22 hours on seven nights for each of the other three. That means Fox is now taking in more money per hour than CBS, once the mightiest network. The good fortune has spilled over to the Fox-owned outlet in Washington, WTTG-TV, whose general manager, Tom Herwitz, boasts that the station collects "substantially" more revenue than any other station in the Washington market.

While backbiting is background music in the entertainment business, Fox comes in for more than its share. Fox's three network competitors -- ABC, CBS and NBC -- complain that Fox has unfairly profited from an exemption from federal regulations that constrain the Big Three from entering some parts of the broadcast business. Disney, a producer, charges in its suit that Fox illegally used its influence with Fox station affiliates around the country to keep Disney from selling children's programming to the outlets. Two other program producers, MCA Corp. and Paramount Communications Inc., were miffed that Fox was able to shut them out from dealing with Fox's stations. Meanwhile, independent stations not affiliated with Fox worry that a pending deal between the network and cable giant Tele-Communications Inc. (TCI) will further weaken them.

Fox Chairman Barry Diller, a confident, driven Hollywood veteran who masterminded the network, waves off the criticism as "vested-interest aggravation." With a soft chuckle, he chastises his competitors in return: "It's really amazing. The truth of the matter is, if I was sitting on their shoulders, I'd be whispering to them, 'you're better off for us.' ... Television has gotten vastly better, and we've been the outside stimulus. No one really likes competition, but it ain't a bad process."

Diller maintains that Fox is still the underdog. CBS, ABC and NBC, he noted, have larger and more powerful affiliate networks, each capable of reaching 99 percent of all the TV sets in the nation. Fox, by contrast, broadcasts over a network composed primarily of UHF stations that cover only 90 percent of the country. "We can't kid ourselves," said Diller. "We're not competitive on any basis with them."

That's not exactly the way the Big Three see it. In a long and heated lobbying battle with Fox before the Federal Communications Commission this past spring, the three broadcasters tried to paint Fox as a monolith, stressing its status as a subsidiary of a vast and profitable foreign media conglomerate, News Corp., Rupert Murdoch's Australian-based company. The networks were attempting to block Fox's request that it be excluded temporarily from federal regulations that prevent the networks from owning more than a handful of their entertainment programs.

Fox needed the exclusion to preserve its unique regulatory status. Its parent, News Corp., is the only company that simultaneously owns a production company -- Twentieth Century Fox Film Corp. -- as well as a TV network. The FCC barred ABC, CBS and NBC from adopting a similar structure in 1970, at a time when the three broadcasters attracted virtually the entire prime-time TV audience every night. The agency feared the Big Three could monopolize the production and syndication businesses if they were allowed to produce and resell their own shows.

Changing the Rules

Fox and the other networks currently agree on one point: The rules should be scrapped now that the networks' share of prime time has eroded badly and alternative markets have developed for independent producers, such as cable TV and independent broadcast stations. The FCC currently is considering an overhaul, but in the meantime, the networks must stand by while Fox operates its network while also reaping millions of dollars from the sale of reruns like "L.A. Law," "M*A*S*H" and other products of Twentieth Century Fox.

"I'd characterize our stand against {Fox} as vitriolic," said Richard Cotton, NBC's general counsel. "What has happened is fundamentally unfair. {Why should} Fox get any special treatment? By any measure, they are a major competitor in the prime-time marketplace."

In May, however, the FCC shot down the networks' arguments, ruling in effect that Fox would not fully develop as a fourth network without one more year of protection. The question facing Diller now is what happens when the FCC's waiver expires in May 1991. If Hollywood's production community is successful in maintaining the rules, News Corp. would face a painful choice: Give up the Fox network or shed Twentieth Century Fox.

Diller believes he'll never have to make that choice. "We've simply been caught by an old definition that I'm confident will be changed," Diller said. "No one can tell me my company has committed a single sin by buying or selling programming and no one will."

In fact, anger is being generated by the manner in which Fox exercises control over its affiliate stations. Three of Hollywoods biggest studios -- MCA Inc., Paramount and Disney -- have attempted in recent months to sell their programming to Fox affiliates, and all three have come away empty-handed.

Disney's Displeasure

The reasons for this are in dispute, most vociferously in Disney's case. Disney charges that Fox has essentially blackmailed its affiliates into refusing a new series of children's cartoons being offered by Disney this fall. Fox has been offering its own afternoon children's show, "Peter Pan," to its affiliates. In its suit, Disney charges that Fox sabotaged its sales efforts by threatening to yank "The Simpsons" and its other popular prime-time shows from stations that agreed to buy Disney's cartoons.

Disney -- whose chairman, Michael D. Eisner, worked under Diller at Paramount -- even took the unusual step of sending a letter blasting Fox to station executives around the country. "Fox is coercing its stations to say 'no' to Disney," the letter reads. " ... Fox's apparent willingness to use its power to deny {its programming} to stations in order to keep them in line is obviously company policy."

For his part, Diller said he has obtained signed affidavits and taped statements from his affiliates attesting to Fox Broadcasting's denials of wrongdoing.

MCA and Paramount got a similar rebuff from Fox's affiliates after the two studios tried to supply the stations with a package of movies and series late last year. MCA and Paramount have not made a legal issue out of it, however. Indeed, both companies are loath to comment on the situation. People close to the two entertainment giants suggest their reticence is a product of cross-loyalties: Both MCA and Paramount, after all, operate successful television syndication units that need to maintain good relations with potential customers like the Fox stations. Moreover, Paramount owns six TV stations itself, three of which have Fox franchises.

In theory, affiliates of the four networks are independently owned businesses with a contractual right to accept or reject any program the network offers. In practice, however, the network-affiliate relationship tends to be symbiotic. The networks need the affiliates to provide the broad coverage that national advertisers seek while the affiliates need the networks to provide them with high-quality programming.

Pressure tactics are "increasingly par for the course with the major networks as the TV audience becomes increasingly fragmented," said Art Goodkind, a Washington attorney who represents several Fox affiliates. "The networks are becoming more insistent that the affiliates {air} a program. ... It's always a question of who has more leverage -- the network or the affiliate."

Yet several executives of Fox affiliate stations suggested that Fox has greater leverage over its affiliates than the other networks. This is because most of the 125 independently owned Fox affiliates broadcast on the UHF dial, competing against a number of other independent UHF channels. The other networks' affiliates are primarily on the limited VHF band -- indeed, in many cities the Big Three outlets occupy all three of the available VHF positions.

Thus, Fox has the flexibility to turn to a competing UHF station if one of its current affiliates proved unsatisfactory. Fox's current stations have particular reason to be pliant because their ratings and advertising revenue have skyrocketed since they joined with Fox. The loss of a Fox affiliation would greatly diminish the value of these stations.

"Where leverage and coercion differ is hard to say," said an executive of a Fox station on the West Coast, who asked not to be named. "Sometimes {persuasion} comes out of the barrel of a gun."

Expansion Plans

In the meantime, Fox's drive for parity with its network brethren is proceeding apace. Confident that the FCC will modify its restrictions, Diller is planning to launch a network news service early next year and expand Fox's prime-time schedule to six nights a week next year and to seven in 1992.

He is also negotiating with Denver-based TCI, the nation's largest cable operator, to carry Fox on local cable systems in the few unenlightened parts of the country where Bart Simpson can't be seen. In exchange, TCI reportedly would upgrade the dial positions of Fox's UHF stations on its systems throughout the country (the lowest numbered channels on a cable system tend to be the most watched).

The pending deal is already drawing carping from independent UHF stations, which worry that upgrading the Fox stations could leave them in "cable Siberia" and widen the already yawning gap between them and the four networks. "It is critically important where a certain station is carried on the cable dial," said James Hedlund, president of the Association of Independent Television Stations.

Diller, of course, is not likely to be deterred by criticism. "Two or three years ago, we were just landing on the beaches," he said, using a D-Day metaphor. "Last year, we made it to the hedges, and yesterday I said we were on our way to Paris. We ain't close to Berlin yet, but we're on the road."