David Cameron's press conference was nearly a masterclass in damage limitation. How firm he sounded with his three-point actions, announcing two inquiries and the demise of the "failed" Press Complaints Commission. Yes, he would have accepted Rebekah Brooks's resignation. How shocked he was. It was "simply disgusting". Here was a wake-up call on the "culture, practice and ethics of the press" and, for now, the crucial BSkyB deal would be delayed. He strove with every sinew to show he gets it, he really does get the public outrage at the hacked phones of a murdered child and dead soldiers. But as the questions rained down, you could see the crisis slipping from his control. This was too little, too late, not quite grasping the changed rules of the old politico-media game.

He said "frankly" once too often, a word that rings alarm bells from politicians on the ropes. "We've all been in this together," he confessed. All the parties, "yes, including me", had cosied up to Murdoch, turning a blind eye to court political support. But paddling hard to stay afloat, he could not say the Murdoch bid should be stopped. He could not apologise for hiring a man who had already resigned over phone hacking. Every time he said he gave Andy Coulson "a second chance", that soundbite sounded weaker. What may some day do for him was his denial that he ever received private warnings, one from the Guardian, not to take Coulson into Downing Street, as further revelations were imminent. "I wasn't given any specific information … I don't recall being given any information." Denials about who knew what often turn embarrassments into serious political danger.

At last Labour has kicked off the shackles: no more of the toadying to Murdoch that shamed Tony Blair and Gordon Brown. In this crisis Ed Miliband has made all the running – and Cameron has been forced to follow, doing what he might not have done otherwise. Miliband was first to call for inquiries, first to call for axing the "toothless poodle" PCC, first to call for Rebekah Brooks's head. Above all, he is the one demanding the BSkyB bid be sent to the Competition Commission, pointing out the emptiness of Murdoch's assurances that Sky News would be independent.

He went further and called for a vote in the Commons on the take-over. He will use an opposition day debate on Wednesday for a vote on the BSkyB bid: there is a good chance the Lib Dems would vote with Labour against Murdoch – how could they dare do otherwise? If they do, they are well and truly done for. Quite a few Tory MPs might join a vote against Murdoch. Over the years Labour leaders have been implored to regain their dignity and find the nerve to stand up to Murdoch. Ed wavered at first: he didn't dare strike out from the start. But now he has crossed that Rubicon there is no going back – and it turns out to be liberating. The game has changed and any politicians creeping back to kowtow will be mocked from now on. The emperor lost his clothes.

Don't imagine this act of defiance will be painless or without consequence. Already a senior Miliband aide tells me they received a "very hostile" threat, not veiled at all, from a News International journalist warning: "You have made it personal about Rebekah, so we'll make it personal about you." Braggadocio maybe, but as the recipient of the threat said: "That's how they operate." And it can be terrifying. Bugging, blagging and Benji the Binman send shudders down many a spine. The spell is broken, but the terror may not be over.

In this whirl of arrests, denials and inquiries, keep your eye firmly fixed on the vital issue. Will Murdoch still get his hands on the rest of BSkyB? Other damage this government does can mostly be rectified – but this would darken the future media landscape forever. It was Cameron's plan to gift Murdoch a power beyond imagining. How valuable? So precious that Murdoch was ready to cast away his highly profitable market leading newspaper selling 2.6m. To casual observers, it may not look important. He already owns 39% of Sky, so why not let him have the rest? Follow the money.

Already Sky's revenue is bigger than the BBC's: this merger would make far more. Bundling up the Times, Sunday Times and other papers with Sky News behind a paywall with sports and movie rights, puts them beyond serious competition. With this online blend, Murdoch expects to knock most other newspapers and their podcasting out of the market. Expensive shares to buy at first, within just two years huge sums would flow in. Buying up everything worth having, he would cripple the BBC – always under Murdoch press attack.

Ofcom is the one regulator that might stop him: two years ago it did weaken Sky's grip on Premier League football and movies, forcing them to sell on the rights at a more reasonable price to others. Murdoch turned the pens of his papers against Ofcom and 10 days later Cameron made an unscheduled speech attacking "the quango state" – in which, oddly, of all the quangos ripe for attack or ridicule, only one was singled out for the axe: Ofcom. Inside the industry, rightly or wrongly it was assumed Coulson was the conduit for this message from the News Corp puppet-master. So now Ofcom may get another chance to declare Murdoch not "fit and proper" to take over all of Sky. But if so, surely that must mean he is not "fit and proper" to own any of it?

Meanwhile, US law may enter the fray. A former Labour cabinet minister has alerted attention to the US Foreign Corrupt Practices Act, which makes an American company (News Corp) liable for colossal fines if any employee bribes a foreign official (the Met police) even if no one at head office knew. What's more, any whistleblower inside the company (sacked News of the World reporters), stands to win a percentage of that fine if they report acts of bribery.

Suddenly, what looked like a done deal is unravelling. Cameron's hiring of Coulson was part of his pact with Murdoch, willing and eager to sell press and broadcasting diversity to a monopolist who has made his fortune out of intimidating governments, avoiding taxes and trouncing regulators in exchange for political support. Labour sank humiliatingly low in its dealings with the old monster. Cameron hit rock bottom. Now that Labour has broken the omerta and is opposing Murdoch unequivocally, Cameron will press on with this deal at his peril.

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• This article was amended on 11 July 2011. The original said that Rupert Murdoch already owns 31% of Sky. This has been corrected.