The government is to carry out a review of the rules on cross-media ownership – but has stopped short of recommending that they should be relaxed.

In the long-awaited Digital Britain interim report out today, communications minister Lord Carter acknowledges the industry’s case for reform of the rules, but says it “needs to be tested against current evidence.”

The report says ministers will invite the Office of Fair Trading to undertake “an exploratory review across the local and regional media sector” to determine whether any change to the current regime is “necessary or desirable.”

It also invites the regional newspaper industry to come forward with ideas on what role local journalism could play in providing impartial news services in the digital age.

The report says: “Local media groups are seeking to make the transition to digital business models but argue the need to consolidate in order to have the scale and sustainability to do so.

“They argue too that the media merger regime does not take account of the potential for competition across boundaries between newspapers and other media. This position, they argue, will become increasingly unsustainable as we move into a fully Digital Britain. Such arguments need to be tested against current evidence.

“To inform whether any change to the merger regime is yet desirable or necessary in relation to the local and regional media sector, the government will invite the OFT to undertake an exploratory review across the local and regional media sector.

“We will be particularly interested in hearing collectively from the local newspaper industry and others about what role local journalism will have in providing impartial news in the digital age.”

The report also leaves open the possibility of providing “alternative funding mechanisms” for newsgathering, acknowledging the difficulties faced by “traditional” media in the face of the digital revolution.

“These structural challenges arise from the transition to digital economics and, with that, the dwindling of the advertising pound and the retail margin for physical copies that, in the past, funded substantial parts of both our traditional media and new media,” it says.

“Faced with these challenges and, in particular, the dwindling of the advertising pound in its historic role as underpinning finance for much content creation, the UK needs to consider whether there are other funding streams or mechanisms that would substitute in whole or in part.

“In the final report, we will examine measures needed to address the challenges for digital content in more detail, including opportunities for providing further support to foster UK creative ambition and alternative funding mechanims to advertising revenues.”

The report also outlined proposals for universal access to broadband and the creation of a “second public service provider of scale” in a revitalised Channel 4.