For overseas readers, it's worth explaining the specific problems in the recent cause celebre - not about the incidents of voicemail hacking, but the wider picture.
From approximately 2001 until at least 2006, the News of the World (NOTW) engaged private detectives to conduct widespread hacking of celebrities, politicians and murder victims, as well as terrorist victims. It is claimed that up to eleven other tabloid (mass market) scandal sheets engaged in similar practices, and even that some were hacking each other's news desks, as well as sending Trojan horse viruses to computers, including those of British spies. The practices appear to have been enormously widespread. The Metropolitan Police knew almost all the NOTW cases by 2006 when they seized Glenn Mulcaire's notebooks with 10,000 pages of detailed notes. They had confronted the editor of the NOTW in 2002, after her reporters had spied on a murder case detective. She lied to them about the motives for the spying at that meeting.
Since 2002, the senior executives at the Murdoch press have lied to their self-regulator (the PCC) which was memorably described as being as effective as a 'fishnet condom', 'gelded' Parliament, the police some of whose members were paid for information which is a criminal corruption, and refused to appear before a Parliamentary inquiry. Any new inquiry will need to consider all these matters.
The most senior NOTW journalist now heads the UK operations of Rupert Murdoch, and will soon control the largest pay-TV operator and fourth largest ISP, BSkyB. BSkyB is licensed by Ofcom and its owner must be a 'fit and proper person' under "section 3(3) of the Broadcasting Act 1990. This requirement applies to the directors and chief officers of any corporate body intended to hold the licence, and of any person or associated corporate body of the applicant deemed to have control of the applicant for the purposes of section 357 of the Communications Act 2003 and in accordance with section 3(7) of the Broadcasting Act 1990, to be in a position to comply with other licence conditions placed upon broadcasters."
The chairman of the holding company for BSkyB at News International is likely to be Mr James Murdoch, who paid off several hackees to purchase their silence in covering up the scandal. Given that obscene pornographer 'Dirty' Richard Desmond holds the licence for Channel 5 and ruthlessly cross-promotes his media properties while lying about his porn empire, it is extremely unlikely that Ofcom will take any action.
The second most senior left the NOTW after leading the industrial scale hacking, to become spokesman for David Cameron between 2007-2011, culminating as his highest paid political staff member as Prime Minister.
This begs the question of the degree of independence of regulatory rule-making by the government in communications policy. The conclusion must be that the government has not a shred of credibility in its decision making over the media, and its censorship proposals for the Internet must be tainted by that association. Moreover, it has a dead-in-the-water press self-regulator which had been making designs on Internet self-regulation for the last five years. This is an ex-parrot.
UPDATE: the useless self-regulator (sic) PCC is to be abolished, and an inquiry started into what form of self-/co-regulation ought to replace it. Separately, an inquiry (which will achieve nothing) will be launched into why the British police were willing to walk into Parliament to seize documents from the Opposition spokesman, but not to walk into News International to prevent large-scale destruction of email evidence as well as payments to police officers and hackees in what appears to be an arguable case of conspiracy to pervert the cause of justice (indictable under the Foreign Corrupt Practices Act in the US as News Corp. is a US-headquartered company).