This article was corrected on October 29, 1992. The Fox Broadcasting Co. series “Rachel Gunn, R.N.” was produced by Columbia Pictures TV (Daily Variety, Oct. 27).Fox Broadcasting Co. is considering the formation of its own in-house production arm by reactivating a semi-dormant unit known as Fox Square Prods. Stu Smiley, Fox’s VP of development in New York, is reportedly in discussions to relocate to Los Angeles and head the stepped-up operation, which would generate and produce shows exclusively for Fox Broadcasting. The idea of an in-house Fox Broadcasting unit could be sensitive politically, since FBC executives don’t want it to appear as if they’re trying to undermine Twentieth TV, the network production arm of Fox Inc. Twentieth was Fox Broadcasting’s leading supplier last season, producing seven series for the weblet. That tally has slipped to two at present, “In Living Color” and “The Simpsons,” though Twentieth is also producing the Chevy Chase late-night strip planned for FBC next fall. A Fox spokeswoman wouldn’t comment on the new post for Smiley and said talk about a new in-house division was essentially much ado about nothing, noting that Fox Square is an existing stand-alone company that’s produced specials, “Totally Hidden Video” and late-night programs”The Late Show” and “The Wilton North Report” for Fox. Insiders also point out that Twentieth makes a priority of producing for the Big Three networks and has never functioned as an FBC in-house division. In fact , the name was changed to Twentieth TV specifically to prevent confusion between the two operations. Twentieth’s current network series include NBC’s “L.A. Law” and “Rhythm & Blues,” plus “Picket Fences” and midseason sitcom “Dudley” for CBS. The company’s also distributes Steven Bochco Prods.’ ABC series “Doogie Howser, M.D.” and “Civil Wars.” Post-Diller vacuum The intrigue surrounding a possible Fox Broadcasting in-house unit stems in part from a perceived power vacuum left by the departure last February of Fox Inc. chairman Barry Diller, who was closely involved in running both Twentieth and FBC. Twentieth TV chair Lucie Salhany’s responsibilities include network production, international sales and domestic syndication, but not Fox Broadcasting, whose top brass–president-chief operating officer Jamie Kellner and Fox Entertainment Group chief Peter Chernin–now report directly to Fox owner-chairman-CEO Rupert Murdoch. Balancing act Historically, at least, there has been some tension in balancing the interests of Twentieth and FBC. A pair of Twentieth FBC series, for example, “Culture Clash” and “Hotel Dicks,” were announced as commitments but then never produced. Two other Twentieth shows, “Stand by Your Man” and “Rachel Gunn, R.N., ” were developed for CBS, then picked up by Fox after the network backed out. It bears noting that most of those incidents predated current management at Twentieth TV. Salhany officially joined the company in June 1991 and hired Steve Bell and Peter Roth as president and president of production, respectively, last spring. Another conduit Fox sources maintain that increased activity by Fox Square would provide another source of programming to feed Twentieth’s distribution machine, as do programs from the Fox Television Stations group’s FTS Prods., which is involved in such Fox shows as “America’s Most Wanted” and “Code 3.” ABC Prods. is the only network production division to have sold programs to other webs, including movies for NBC and CBS as well as the upcoming Fox series “Class of ’96.” Fox denied there were any plans to refer to Fox Square as Fox Broadcasting Co. Prods., similar to designations used by the network in-house wings.