Murdoch's News Corp in TV piracy claim

2012-03-28 11:03

London/ Melbourne - Pressure is building in Britain and Australia for fresh probes into Rupert Murdoch's News Corp, already under siege over phone-hacking claims, after allegations that it ran a secret unit that promoted pirating of pay-TV rivals.

The Australian Financial Review on Wednesday alleged that News Corp had used a special unit, Operational Security, set up in the mid-1990s, to sabotage its competitors, reinforcing claims in a BBC Panorama documentary aired earlier this week.

"These are serious allegations, and any allegations of criminal activity should be referred to the AFP (Australian Federal police) for investigation," a spokesperson for Australian Communications Minister Stephen Conroy said.

Operational Security was a unit of News Corp's secure-encryption subsidiary NDS, which has denied any wrongdoing in relation to the Panorama claims.

News Corp, which this month sold NDS to Cisco Systems for $5bn, said it accepted those assurances.

NDS has faced several lawsuits over alleged piracy: One was dropped and the firm was largely cleared in the others.

Dirty tricks campaign

NDS's Operational Security unit, staffed by former police and intelligence officers, used hackers to crack the codes of smartcards issued to customers of rival pay-TV services. The hackers then sold black-market smartcards using those codes to give viewers free access to those services, the Review said.

This cost News Corp's rivals millions of dollars, it added.

The Operational Security unit had originally been set up to hunt pirates targeting Murdoch's own operations but later turned into a dirty-tricks campaign to undermine competitors, it added.

The BBC Panorama documentary broadcast on Monday alleged that NDS hired a consultant to post the encryption codes of ITV Digital, a key rival of Murdoch's 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.

UK regulator Ofcom is already investigating News Corp and a senior executive, James Murdoch, youngest son of Rupert, 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.

Global conspiracy

"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 said on Tuesday.

An Ofcom spokesperson 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.

James Murdoch has also served as an NDS director.

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."


The Australian Financial Review, citing a four-year investigation and a trove of internal NDS e-mails, said the piracy undermined the value of competitors like DirecTV in the United States and Telepiu in Italy, and helped News Corp to take them over cheaply.

"NDS sabotaged business rivals, fabricated legal actions and obtained telephone records illegally," said the newspaper, which is owned by Fairfax Media, a rival of News Corp in Australia.

A spokesperson for News Limited, the Australian arm of News Corp, was not immediately available for comment on the newspaper's claims.

News Corp owns 25% of Australia's top pay-TV firm, Foxtel, which is looking to take over rival Austar.

Austar declined to comment on the report.

Foxtel said NDS was one of many service suppliers it had used, and the pay-TV company had worked hard to combat piracy. "Foxtel notes that there are no allegations of wrongdoing by Foxtel," a spokesperson said in a statement e-mailed to Reuters.

Future in doubt

UK lawmaker Watson is known for his dogged questioning of James and Rupert Murdoch for their role in the phone-hacking affair, notoriously comparing James to a Mafia boss when he appeared at a parliamentary hearing on 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.

"There's no suggestion anywhere that Sky or News Corp knew what NDS was doing," broadcaster and media consultant Steve Hewlett said. "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.

The Australian Financial Review's investigation involved 14 400 e-mails from a hard drive in a laptop used by Ray Adams, who was the European chief for NDS Operational Security from January 1996 to May 2002.

The newspaper said Adams plotted a legal campaign in an attempt to ruin the reputation of a Swiss hacker, Jan Saggiori, who had evidence that NDS had sabotaged the products of News Corp's rivals.

Hackers and pirates

E-mails between Adams and News executives raised "questions about whether News was involved in an abuse of process of the US court system", it added.

The BBC's Panorama interviewed Lee Gibling, owner of a satellite hacking website, who said NDS funded the expansion of his site and had him distribute ITV Digital's codes.

NDS said it had 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 said.

"To compare yours against others, you have to test them and there's a chance you'll succeed."

Complex picture

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's a complex picture, but to say that ITV Digital failed because of piracy, I think, is not correct," said Hewlett, who was working for an ITV company at the time.

An industry source in Australia said hacking was a common problem in the 1990s but the industry had changed over the past decade as engineers had worked out how to address these issues.

NDS was sued in a $3bn 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.