Ministers are quietly drawing up legislation that would tear up merger regimes for television, regional newspapers and local radio as part of the biggest shake-up in media regulation since the beginning of the decade.

A short Bill - the Digital Economy Bill - is being prepared to implement the conclusions of the Digital Britain review, which will determine the future of Channel 4 and is expected to provide help for struggling newspapers and broadcasters.

Although it is a convention that ministers do not publicly discuss the Bills that comprise the Queen's Speech in the autumn, Andy Burnham, the Culture Secretary, has been privately telling media companies that new legislation is likely.

The expectation of a Bill gives regional newspaper groups and radio companies hope that they will benefit from an easing of regulations, with the Government increasingly sympathetic to a relaxation of the rules that could allow consolidation between the publishers Trinity Mirror and Johnston Press or the radio groups Bauer, owner of Magic and Kiss, and UTV, the owner of TalkSPORT.

Without new laws, ministers have concluded that it will not be possible to introduce changes called for by Digital Britain. However, the problem for Labour is that any Bill will have to be scrambled through before a general election, expected in May or June next year. That means that the Bill is likely to be short - about 30 or 40 clauses - and will concentrate on implementing the recommendations of the Digital Britain review that require changes in the law, rather than a root-and-branch look at communications law. “If that happened, the timing means that new rules couldn't come in till 2013, which would be a very long time since the last Communications Act of 2003,” one insider said.

Digital Britain is being touted in Whitehall as a way for Labour to show it has a plan to reorganise the British economy, and reduce its dependence on financial services. However, with time tight before an election, the proposed legislation could yet fail to reach the statute books.

A Digital Britain White Paper is expected to be published in early summer, but at this point, key decisions have yet to be made. Ministers are still studying several options for the future of state-owned Channel 4, which says it needs up to £150 million a year to ensure its survival as a broadcaster of high-quality and entertainment television into the next decade.

Because Channel 4 is a public corporation, any deal that involves it issuing shares, or merging at the holding company level with a rival, such as BBC Worldwide, the BBC's commercial arm, or RTL's Five, would require primary legislation. But it is not a certainty that Channel 4's status will change.

Repeated lobbying by Andy Duncan, the chief executive of Channel 4, for public support has not gone down well with ministers, and the broadcaster is under pressure to show that it is running itself as efficiently as possible. At the same time there are growing doubts about whether a tie-up of any kind between Channel 4 and the BBC would be good for competition - giving the struggling Five hope that it could yet be allowed to merge with Channel 4.

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