And ex-NoW royal editor Clive Goodman, jailed in 2007 for phone hacking, has been arrested over corruption claims.
It came as Prime Minister David Cameron defended his decision to employ Mr Coulson and announced two inquiries - one led by a judge - into the scandal.
Mr Coulson has denied any knowledge of phone hacking while he was NoW editor.
The controversy has raised questions about the proposed takeover of satellite broadcaster BSkyB by Rupert Murdoch's New Corporation, the ultimate owner of the News of the World.
And broadcasting regulator Ofcom has now written to the chairman of the Commons culture committee highlighting its duty to ensure that anyone holding a broadcasting licence is a "fit and proper" person to do so.
The letter says "in considering whether any licensee remains a fit and proper person to hold broadcasting licences Ofcom will consider any relevant conduct of those who manage and control such a licence".
Fresh revelationsMr Coulson, 43, was arrested at 1030 BST on Friday by detectives investigating allegations of hacking the phones of various people in the news and is also being questioned about corruption allegations.
He was arrested by appointment at a south London police station and is in custody.
A number of suited men, thought to be police officers, entered Mr Coulson's south London home with large plastic crates at about 1200 BST.
Continue reading the main story Operation Weeting - investigating phone hacking or intrusion into the private lives of hundreds of people. They aim to contact all those whose personal details were found in documents seized in 2006 Operation Elveden - investigating alleged police corruption. Documents handed over by News International on 20 June were assessed by police as including "information relating to alleged inappropriate payments to a small number of officers". And, following his arrest, Goodman, 53, is understood to be being held at a south London police station, although not the same one as Mr Coulson.Mr Cameron said of Mr Coulson: "I became friends with him and I think he did his job for me in a very effective way. He became a friend and he is a friend."
In other developments:
Rebekah Brooks is speaking to News of the World staff at the paper's headquarters in Wapping, LondonProsecutors have asked Strathclyde Police to examine specific claims of phone hacking in Scotland by the NoWNews International has said it is shutting the News of the World after this Sunday's edition following a spate of fresh revelations.
The 168-year-old tabloid is accused of hacking into phones of crime victims, celebrities and politicians. Police have identified 4,000 possible targets.
Mr Cameron said the judge-led inquiry would look into "why did the first police investigation fail so abysmally; what exactly was going on at the News of the World and what was going on at other newspapers".
"Of course the bulk of this inquiry can only happen when the police investigation has finished. That is what the law requires," he added.
Andy Coulson (l) and Clive Goodman were arrested as part of the investigation into phone hacking Mr Cameron said a second inquiry would look at the ethics and culture of the press and that the Press Complaints Commission (PCC) should be scrapped, adding: "I believe we need a new system entirely".
He also questioned the tenability of Rebekah Brooks as News International chief executive considering she was editor of the News of the World at the time murdered schoolgirl Milly Dowler's phone was being hacked.
Mr Cameron said there had been reports she had offered her resignation and added: "In this situation I would have taken it."
In January 2007 Goodman, and a private investigator, Glenn Mulcaire, were both jailed for plotting to intercept voicemail messages left for royal aides.
Background checkMr Coulson, who was the paper's editor at the time, said he took "ultimate responsibility" for the scandal but insisted he was unaware of any phone hacking by his journalists.
He was employed as Mr Cameron's director of communications in 2007 but Guardian editor Alan Rusbridger claims he warned Mr Cameron's team not to employ Mr Coulson.
Rupert Murdoch has resisted pressure to force Rebekah Brooks to resign The prime minister said he did not remember receiving "any specific action or information about Andy Coulson" but would check with his officials.
Asked if he had "screwed up" on the decision to employ Mr Coulson, Mr Cameron said: "People will decide."
He said: "I decided to give him a second chance but the second chance didn't work. The decision to hire him was mine and mine alone."
The prime minister said a company had been hired to run a "basic background check" on Mr Coulson before he was employed while the Conservatives were in Opposition.
Mr Cameron admitted politicians were to blame for "turning a blind eye" to bad practices in journalism.
He said this was a "genuine opportunity" and a "cathartic moment" both for the media and for politicians and he said the phone hacking scandal was a "black cloud" hanging over Fleet Street.
'Unconvincing answers'Asked about the decision to close the paper, Mr Cameron said: "What needs to change is not the name of the paper or the letterhead but the practices that go on."
Mr Cameron admitted politicians and the media had got a bit "cosy" but he added: "As a party leader you are bound to want a relationship with the media because you want to get your message over and if that means talking to the head of the BBC, the editor of the Guardian or Rupert Murdoch I will go out and do that."
Labour leader Ed Miliband said the PCC was "a toothless poodle"Asked about the takeover of BSkyB by Rupert Murdoch's News Corp, Mr Cameron said Culture Secretary Jeremy Hunt was following "the proper legal processes and procedures".
He said: "His role is to take the advice of independent regulators and, as his department have made clear this morning - given the events of recent days - this will take some time."
Afterwards the Labour leader Ed Miliband said the prime minister "clearly still doesn't get it".
He said: "He is ploughing on regardless on BSkyB. He failed to apologise for the catastrophic mistake of bringing Andy Coulson into the heart of government.
"His wholly unconvincing answers of what he knew and when he knew it about Mr Coulson's activities undermine his ability to lead the change that Britain needs."
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