Abe Peled: King Rupert's advance party

Dawn Hayes meets Abe Peled, a key man in Murdoch's global pay-TV assault, and hears of territorial skirmishes and charges of piracy

Few of Rupert Murdoch's lieutenants tell jokes about the boss – and survive. But Abe Peled is different. The 56-year-old Israeli, who not only runs Murdoch's 80 per cent-owned subsidiary, News Data Services (NDS), but sits on the News Corporation executive committee, likes to tell a few tales of his time in the court of king Rupert.

His favourite, which he recounts in heavily accented English, is the one about "the shortest presentation of all time". It was in 1996 at a gathering of the News Corp elite, when a supposed "expert" stood up and told the meeting that "the future is the internet, not TV". Barely were the words out of his mouth before Murdoch walked out of the room.

Peled needs his sense of humour. NDS is seen by many as the provisional wing of Murdoch's assault on pay-TV around the world, providing the encryption services to the likes of BSkyB (34 per cent owned by News Corp) that are designed to stop people who haven't paid from watching the programmes for free.

It is also engaged in a bitter battle with two US corporations, which it accuses of blocking it out of the lucrative stateside pay-TV market. At the same time, it is being sued by Canal Plus, the television side of Vivendi Universal, for alleged hacking. It is also accused of contributing to the demise of ITV Digital.

After a week in which Lord Puttnam's parliamentary committee has raised concerns about US-based companies, such as News Corp, being given carte blanche to take over British television, it takes some chutzpah to point the accusing finger back across the Atlantic.

But that's just what Peled is doing. NDS's attempts to sell to US cable companies have been largely blocked by the entrenched duopoly held by Motorola and Scientific Atlanta. The American duo's technology defines how TV is distributed across the US, rather like BSkyB controls what is shown on pay-TV in the UK.

Peled accused them of freezing NDS out of the market. This is a big bind for NDS as it is building technology that will make TV sets act like powerful games consoles, as well as creating games programs. Given that the games industry is worth more than the film industry, it could become an important add-on to News Corp's entertainment machine.

If the ironies of doing business as a global media company are becoming more apparent, Peled is not complaining too loudly. The Nasdaq-listed NDS will be a beneficiary of any pay-TV business that Murdoch wins, thanks to the British government. Some 40 per cent of its revenues come from News Corp, although Peled is quick to point out that only one of the company's last eight contracts were from its 80 per cent shareholder.

"Overall, being part of News Corporation is probably a plus, but it can actually make it harder to win business because people suspect we're another way for the company to siphon off money, particularly in the UK where the paranoia is worst," says Peled. The company will report full-year earnings tomorrow which will demonstrate that, relative to many of its Nasdaq peers, its business is doing well. It is expected to show that pre-tax profit for the year to 30 June rose around 18 per cent to £49m, and sales jumped 12 per cent to £240m.

But with no prospect of the US Federal Communications Commission reciprocating the British government's plans for media deregulation, NDS will continue to use the tactics more commonly employed in this industry to penetrate the US cable market. It has cosied up to Motorola, ostensibly to co-develop new technology. But the bigger picture is that NDS can help Motorola sell its goods internationally in exchange for giving NDS a leg up in the US. Quite how successful this partnership will prove remains to be seen.

Peled, though, is determined to break through: "We'll continue banging our heads against the brick wall until it breaks – the wall, that is."

The relationship between Murdoch and the short, impish Peled goes back to 1995, when he was hired personally by the media tycoon after a long career with IBM, preceded by a spell as a technical officer in the Israeli Army Signal Corps. Peled said he had no intention of taking the job at News Corp's then tiny UK company, having just moved back to Israel.

But he was persuaded by Murdoch's vision of NDS as a cornerstone in News Corp's digital pay-TV plans. Murdoch needed someone to take it in hand after a series of tax investigations had led to NDS's Israeli offices being raided, and one of its former executives arrested.

Conspiracy theorists – and many abound in the media industry – believe the technical know-how of Peled and his NDS people has helped Murdoch get one over on some of his rivals. The most obvious example is the spat with Vivendi, the troubled French TV giant, which blew up a few months ago.

NDS is accused of setting out to break the security code developed by rival Canal Plus Technologies (CPT), owned by Vivendi, and then forwarding the information to pay-TV pirates, who published it on the internet. This resulted in significant loss of revenue for around 10 European pay-TV networks which use the technology, including the former ITV Digital, as people bought pirate smart cards – the devices that viewers plug into their set-top boxes.

Peled maintains that NDS did not break CPT's code. "It's remarkable how the thing played out. The truth is that CPT has been ineffective in dealing with piracy once it occurred. With ITV Digital, it was well-known you could buy the smart cards on street corners. They were unable to do anything about it."

The lawsuit from Vivendi is all but dead, thanks to a deal brokered by executives at the top of News Corp and Vivendi: if News Corp buys Telepiu, Vivendi's Italian pay-TV rival, and drops its own court action against Vivendi for what it calls Telepiu's monopolistic practices against News Corp's network there, Vivendi will drop its lawsuit. As for ITV Digital, there has been no suggestion that lawyers for its administrators will be firing off writs at Peled.

This kind of piracy has been a regular feature of the pay-TV industry since its inception. NDS's systems, too, have been hacked numerous times. But Peled says that in the past four years it has developed technology which can launch electronic counter- measures over the air to stop pirate smart cards working.

It all sounds a bit "space age". But Peled is not about to predict how the future will play out. He doesn't want Rupert Murdoch walking out on him.