- Britain's communications regulator Ofcom will assess if British Sky Broadcasting should still hold a broadcasting licence
- The intensifying scrutiny is a setback to James Murdoch in spite of stepping down last month as executive chairman of News International
- The Ofcom probe is considering the status of both James Murdoch and News Corp as "fit and proper" persons to own the BSkyB licence.
Rupert Murdoch is facing a fresh challenge to his UK media business as it emerged that Britain's communications regulator has escalated its probe into whether British Sky Broadcasting is a "fit and proper" owner of a broadcasting licence.
Following preliminary investigations last year, Ofcom set up a dedicated team in January to scrutinise material emerging from the Leveson inquiry into the British press's practices and the police's investigations into phone hacking and corrupting public officials, according to minutes released under a Freedom of Information Act request made by the Financial Times.
Ofcom's team -- known as Project Apple -- will assess if BSkyB should still hold a broadcasting licence in light of the phone-hacking scandal that engulfed Mr Murdoch's News of the World newspaper last year.
The intensifying scrutiny is a setback to James Murdoch, who has remained chairman of the satellite broadcasting company, in spite of stepping down last month as executive chairman of News International, which runs the group's British newspapers.
The Ofcom probe is considering the status of both James Murdoch and News Corp, which holds a 39.1 per cent stake in BSkyB, as "fit and proper" persons to own the BSkyB licence.
Should Ofcom rule against them, it could threaten James Murdoch's position as chairman of BSkyB or trigger a process that would force News Corp, chaired by Rupert Murdoch, to cut its stake in BSkyB to a level at which it was no longer deemed to exercise control.
Project Apple was discussed at an Ofcom board meeting on January 24, according to the minutes released under the FOI request. The regulator also discussed the issue at a board meeting in late February.
The decision to escalate the investigation came at the beginning of the year following talks between the regulator, politicians and the police.
Last July, Ofcom reassured politicians that it would continue to monitor whether BSkyB was "fit and proper" to maintain its licence in light of concerns over involvement by subsidiaries of News Corp in phone hacking in the UK.
At the time, the regulator made clear it did not have to wait for the end of the criminal investigation, nor was it necessary for any individual to be convicted for it to reach its conclusion. However, a decision on the "fit and proper" test is not expected until the Leveson inquiry and police investigations are more advanced.
Ofcom said: "New evidence is still emerging from the various enquiries in relation to the hacking and corruption allegations. Ofcom is continuing to assess the evidence that may assist it in discharging its duties."
BSkyB declined to comment.
Lord Oakeshott, the Lib Dem peer, said it was "high time" Ofcom ruled on whether BSkyB was fit and proper to hold a broadcasting licence. "How much more evidence does Ofcom need when a senior Metropolitian police officer, Sue Akers, gave evidence to the Leveson inquiry of a "culture at the Sun of illegal payments"
Last summer, Rupert Murdoch bowed to intense political pressure and withdrew News Corp's planned bid to take full control of BSkyB after the company admitted the public uproar over phone hacking had made the climate "too difficult".
The decision to abandon the 13-month pursuit of the UK satellite broadcaster, which would have cost £8.3bn or more, came after Mr Murdoch shut the News of the World in response to the phone-hacking scandal.