* BBC Panorama says News Corp's NDS helped piracy of rival
* NDS denies wrongdoing, News Corp says accepts assurances
* NDS sold for $5 billion to Cisco this month
By Georgina Prodhan
LONDON, March 27 A British lawmaker is to demand
that the UK television watchdog probe new hacking claims against
News Corp, piling more pressure on BSkyB
Chairman James Murdoch, whose fitness to own a broadcast licence
is already under scrutiny.
A BBC Panorama documentary broadcast on Monday alleged NDS,
a pay-TV smartcard maker recently sold by News Corp for $5
billion, hired a consultant to post the encryption codes of ITV
Digital, a key rival of the then Sky TV, on his website.
Widespread piracy after the online publication of the codes
contributed to the 2002 collapse of ITV Digital, which had been
set up by the parties that later formed ITV, Britain's
leading free-to-air commercial broadcaster, in 1998.
BSkyB, now Britain's dominant pay-TV broadcaster, is 39
percent owned by News Corp. Murdoch sits on NDS's board.
NDS said in a statement: "It is wrong to claim that NDS has
ever been in the possession of any codes for the purpose of
promoting hacking or piracy."
News Corp said: "NDS has consistently denied any wrongdoing
to Panorama and we fully accept their assurances."
Regulator Ofcom is already investigating both Murdoch and
News Corp in the light of new evidence emerging from probes into
phone and computer hacking and bribery at the News of the World
tabloid, which News Corp shut down last July.
"These allegations, if true, are the most serious yet and I
am referring the matter to Ofcom, who have a duty to investigate
as part of their fit and proper test," member of parliament Tom
Watson said of the claims made in the BBC's Panorama programme.
"If what Panorama says is true, it suggests a global
conspiracy to undermine a great British company, ITV Digital,"
he told Reuters on Tuesday.
An Ofcom spokesman declined to comment on the specific
allegations but said the regulator would consider "all relevant
evidence" as part of its ongoing duty to be satisfied that the
owner of the licence was fit and proper.
Watson is known for his dogged questioning of James Murdoch
and his father Rupert for their role in the phone-hacking
affair, notoriously comparing James to a Mafia boss when he
appeared at a parliamentary hearing investigating the hacking.
The committee has been due since early this year to present
a report based on its investigations, which is expected to be
critical of James Murdoch and may determine whether he has a
future in Britain.
Watson said the report was now unlikely to be published
before the Easter holiday on April 8. He said the new
revelations were unlikely to affect the committee's work, since
they were not part of its remit.
James Murdoch was not involved in News Corp's UK newspaper
operations when the phone-hacking took place at the News of the
World but is under scrutiny for failing to uncover the scale of
the problem when he took charge there shortly afterwards.
Murdoch is now based in New York following his promotion to
deputy chief operating officer of News Corp last year, and is
focusing on the conglomerate's pay-TV businesses. He severed all
ties with the UK newspapers earlier this month.
"There's no suggestion anywhere that Sky or News Corp knew
what NDS was doing," broadcaster and media consultant Steve
Hewlett told Reuters.
"But if it all turns out to be true, then you have a News
Corp company once again behaving in ways that are less than
proper," he said.
APPETITE FOR RISK
The Panorama documentary featured an interview with Lee
Gibling, the owner of a satellite hacking website, who said NDS
funded the expansion of his site and had him distribute ITV
NDS said it never used or intended to use the site for any
illegal purpose, and said it had paid Gibling for his expertise
so that information from the site could be used to track and
catch hackers and pirates.
NDS also said it was common for companies in the pay-TV
industry to discover one another's encryption codes - a view
endorsed by Adam Laurie, a security researcher with UK-based
Aperture Labs, which specialises in access control.
"It's possible they cracked them themselves in order to test
the security of the algorithms," he told Reuters. "To compare
yours against others you have to test them and there's a chance
ITV Digital was beset by issues from the start, including
internal competition between its shareholders, a lack of premium
content, and a price war with BSkyB, which had been shut out of
the venture by the regulator.
"It was a question of who's got the deepest pockets and the
biggest appetite for risk, and it wasn't ITV," said Hewlett, who
was working for an ITV company at the time.
"It's a complex picture, but to say that ITV Digital failed
because of piracy, I think, is not correct."
NDS, whose technology is used by BSkyB and News Corp pay-TV
operators including Sky Italia and Sky Deutschland,
was sold by News Corp and private equity firm Permira to Cisco
The deal is expected to close in the second half of 2012.
Cisco had no immediate comment on whether the new
allegations posed any risk to the deal. NDS said Cisco had been
fully briefed on past allegations and court cases.
NDS was sued in a $3 billion lawsuit in 2002 by Canal Plus,
which had supplied the scrambling technology for ITV Digital and
accused NDS of extracting the code from the cards and leaking it
onto the Internet.
Canal Plus dropped the action in 2003 when News Corp bought
Italian satellite pay TV company Telepiu from Canal Plus's then
debt-stricken owner Vivendi, renaming it Sky Italia.
U.S. satellite TV provider EchoStar, which had
tried to join the Canal Plus suit, then sued NDS in 2003 in a
similar case. NDS was cleared of the main charges and EchoStar
won a tiny fraction of the $2 billion in damages it had sought.
Earlier this month, NDS was awarded $19 million in legal
fees and costs a fter the U.S. Supreme Court denied a petition by
EchoStar and Swiss digital security company Kudelski
over their allegations that NDS had abetted piracy in the United
In Italy, a long-running pay-TV piracy trial is still
ongoing. One of the defendants, Davide Rossi, says he was
collecting intelligence on behalf of an NDS security officer.
NDS said on Tuesday: "NDS wholly refutes the allegation that
Mr Rossi acted illegally on behalf of NDS. NDS is not a
defendant in the trial in Sicily or any other."