London • Rupert Murdoch's dream of controlling Britain's largest pay-TV broadcaster evaporated Wednesday as he withdrew his bid for BSkyB — the latest, biggest casualty of what Prime Minister David Cameron called the hacking "firestorm" sweeping through British politics, media and police.

Cameron appointed a senior judge to lead an inquiry into the phone hacking and police bribery scandal engulfing Murdoch's British newspapers, and promised it would investigate whether Murdoch's reporters sought the phone numbers of 9/11 victims in their quest for sensational scoops.

"There is a firestorm engulfing parts of the media, parts of the police, and indeed our political system's ability to respond," Cameron said Wednesday in the House of Commons. "What we must do [is] to make doubly sure that we get to the bottom of this and that we prosecute those who are responsible."

As lawmakers united to demand that Murdoch's News Corp. withdraw its bid for British Sky Broadcasting, the media magnate bowed to the inevitable, accepting that he could not win government approval for the multibillion-dollar takeover of the nation's most profitable broadcaster.

Shares in BSkyB fell 4 percent after the announcement, but rebounded as uncertainty about the company's immediate future was lifted and closed 2 percent higher. News Corp.'s stock rebounded as investors returned their focus to the company's ballooning cash balance, with hopes that it will shed ownership of all its U.K. newspapers. Shares rose 28 cents, or 1.74 percent, to $16.36 in trading.

Murdoch had hoped to gain control of the 61 percent of BSkyB shares that he doesn't already own. The takeover — potentially his biggest, most lucrative acquisition — appeared certain to succeed just over a week ago, despite concerns about the size of Murdoch's hefty share of the British media market.

But the deal unraveled with stunning speed after a rival newspaper reported that Murdoch's News of the World tabloid had hacked into the phone and messages of scores of people. What had for several years been a trickle of allegations by people who claimed to have been hacked by the paper — from celebrities such as Sienna Miller and Jude Law to politicians — became a torrent that included victims of criminals and terrorists.

News Corp., which owns the Fox network in the U.S., responded by killing off the 168-year-old weekly newspaper, which published its final issue on Sunday. Murdoch flew to London in a desperate scramble to keep the BSkyB bid alive.

But still the allegations mounted. The Daily Mirror newspaper, a rival to Murdoch's The Sun tabloid, claimed that a reporter for a Murdoch paper may have sought the phone numbers of victims of the Sept. 11 attacks in the United States. Politicians from all parties finally abandoned him.

For Murdoch, it was a dramatic reversal. For three decades, the Murdoch media empire has had near-mythic powers among British politicians to destroy careers and determine the result of elections. Steven Barnett, communications professor at the University of Westminster, said Murdoch's retreat signaled a new era in British political life. "After 30 years of successive governments caving in to powerful media corporations, finally Parliament has realized it has to take a stand," he said

Police are pursuing two investigations of News International, one on phone hacking and the other on allegations that News of the World bribed police officers for information. Police have indicated the bribery investigations involve about half a dozen officers.

Detectives have arrested eight people so far in their hacking investigation. No one has been charged. Cameron said police had the names of more than 3,700 potential victims, and would be contacting them all.

The allegation that Murdoch papers may have targeted 9/11 victims comes from the Mirror, which quoted an anonymous source as saying an unidentified American investigator had rejected approaches from unidentified journalists who showed a particular interest in British victims of the terror attacks. It cited no evidence that any phone had actually been hacked.

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

If there was any phone hacking of Americans "the consequences will be severe," said Rockefeller, chairman of the Senate Committee on Commerce, Science and Transportation.

A report Wednesday in The Wall Street Journal, which is part of News Corp., said Murdoch met with advisers in recent weeks to discuss possible options, including the sale of his remaining British newspapers — The Sun, The Times and The Sunday Times. The Journal, citing unidentified people familiar with the situation, said there didn't appear to be any buyers given the poor economics of the newspaper division.

A defiant mood was evident at The Sun, which slapped the headline "Brown Wrong" across its front page in response to the former prime minister's claims the paper had obtained confidential medical records of his 4-year-old son Fraser.

The newspaper insisted it learned of the boy's ailment from the father of another child with the same condition, and that it contacted the Browns, who consented to the story.

On Wednesday, Brown accused Murdoch's media empire of "lawbreaking often on an industrial scale."

Speaking in the House of Commons, he said victims saw "their private, innermost feelings and their private tears bought and sold by News International for commercial gain."

"News International descended from the gutter to the sewer," Brown said.