LONDON - Rupert Murdoch's News Corp media empire dropped its bid to takeover lucrative British Sky Broadcasting on Wednesday ahead of a House of Commons vote in which all three major parties were to issue that very demand.

News Corp deputy chairman and president Chase Carey said "it has become clear that it is too difficult to progress in this climate".

Prime Minister David Cameron acknowledged that "a firestorm" was engulfing Britain's press, police and government over allegations of phone hacking and alleged police bribery by Murdoch's UK papers, and named a judge to lead the investigation.

The hacking allegations even leapt across the Atlantic. Speaking hours before the vote, Cameron vowed to find out whether UK media may have sought phone numbers of 9/11 victims in their quest for sensational scoops.

Outrage has grown and Murdoch's News Corp's share price has fallen since a report last week that The News of the World hacked the phone of teenage murder victim Milly Dowler in 2002, followed by claims of intrusion into private records by Murdoch's other UK papers, The Sun and The Sunday Times.

Dowler's family was scheduled to meet with Cameron at 10 Downing Street later on Wednesday.

Shares in BSkyB were down 2.3 percent on Wednesday, the seventh straight day of losses, as hopes faded for a share-boosting takeover bid.

"There is a firestorm, if you like, that is engulfing parts of the media, parts of the police, and indeed our political system's ability to respond," Cameron said in the House of Commons. He said the focus must now be on the victims, and make sure that the guilty are prosecuted.

Police have arrested eight people so far in their investigation, including Cameron's former communications director Andy Coulson, a former editor of News of the World. No one has been charged.

Cameron appointed Lord Justice Brian Leveson to lead the inquiry, which will be able to compel witnesses - including government figures - to give evidence under oath.

Leveson will first investigate culture, practices and ethics of the press, its relationship with police and the failure of the current system of self-regulation, which is expected to last up to 12 months. Only then will the inquiry focus shift to what went wrong at the News of the World tabloid and other papers, Cameron said.

The suggestion that 9/11 victims may have been targeted surfaced on Monday in the Mirror, a British competitor of The Sun. It quoted an anonymous source as saying an unidentified American investigator had rejected approaches from unidentified journalists who showed a particular interest in British victims. It cited no evidence that any phone had actually been hacked.

In Washington, Senator Jay Rockefeller, a Democrat from West Virginia, urged an investigation into whether Murdoch's News Corp had violated US law because of the British paper's activities.

If there was any hacking of phones belonging to 9/11 victims or other Americans, "the consequences will be severe", Rockefeller said.

Murdoch had hoped to gain control of the 61 percent of BSkyB shares that his News Corp doesn't yet own, but the bid was delayed for several months while the British government's Competition Commission reviewed monopoly concerns.

Associated Press