Israeli Firm NDS Accused of Helping News Corp Sabotage Rivals

The BBC reported NDS leaked details online that enabled British viewers to access pay TV channels for free.

One of Israel's most prominent hi-tech success stories, NDS, has this week become embroiled in a hacking scandal that's going global. News Corporation has strenuously denied allegations that NDS, which it partly owns, had anything to do with the ruination of rival TV companies - but meanwhile similar allegations are surfacing in Australia.

The BBC news program "Panorama" reported earlier this week that NDS, which is partly owned by Rupert Murdoch's News Corp and partly by the Permira investments fund, leaked details online that enabled British viewers to access pay TV channels for free.

The leaks are alleged to have led to the 2002 financial collapse of ONdigital (later called ITV Digital ), which was then the biggest rival to News Corp's Sky television network in Britain.

On Wednesday, the Australian Financial Review journal published the results of an inquiry and claimed that an NDS subsidiary, called Operational Security, similarly impaired rival broadcast companies Austar, Optus and Foxtel in the late 1990s.

NDS was founded as a start-up by a group of researchers from the Weizmann Institute in 1988 and is a world leader in developing encrypted smart cards and other systems for digital television networks.

NewsCorp bought it in 1992 and has been a key component in the corporation's expansion of its TV networks worldwide. News Corp still owns 49% of NDS, which is currently based in Britain but has research centers in Israel.

Two weeks ago, it was announced that American computer giant Cisco Systems is planning to buy NDS for around $5 billion.

On Tuesday, "Panorama" claimed that NDS had leaked - through a website called Thoic (The House of Ill-Compute ) - details enabling viewers in the UK to access TV channels operated by ONdigital for free.

Thoic was basically controlled by NDS, according to Lee Gibling, the programmer who set up the website in the late 1990s. NDS admits to having used Thoic for the purpose of combating hackers of television services.

Gibling claims that he was handed the codes by Ray Adams, the head of NDS' security unit in Britain and a former senior police officer. The BBC also published internal NDS e-mails that purport to prove that NDS did indeed transfer secret codes to Thoic.

According to its former executives, ONdigital to a large degree went bankrupt in 2002 due to "piracy" that allowed viewers to access content.

The BBC allegations could not have come at a worse time for Murdoch and News Corp. Ofcom, the British broadcasting regulation body, is already reconsidering whether News Corp's highly-profitable BSkyB is a "fit and proper" broadcasting license holder.

NDS denies all: "NDS uses industry contacts to track and catch both hackers and pirates. This is neither illegal nor unethical. And, to ensure that all activity remains completely within legal bounds, NDS staff and their contacts operate under a clear code of conduct for operating undercover."

NDS was sued for $1 billion four years ago by American television provider EchoStar over similar charges. However, this January NDS was cleared by the U.S. Supreme Court and EchoStar was made to pay $19 million in costs and legal fees.