A few months ago Nick Xenophon approached me and the editors of other smaller independent and regional media companies with a reasonable question.

If the senator was to back the government’s plan to scrap rules protecting diversity of media ownership in Australia, paving the way for mergers that would increase the power of the biggest media companies, what could he propose to make sure smaller players were not squeezed out of the market?

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That plan passed the Senate this week, with a small and regional media fund negotiated by Xenophon. Most in the media are welcoming it. The Greens and Labor say he gave away media diversity protections far too cheaply. It certainly wasn’t what we suggested – we were arguing for tax breaks to encourage philanthropic donations for public interest journalism like those available in the US. Nor was it what Xenophon originally proposed. He says it was the best he could get.

But all three parties condemn the government’s insistence that Guardian Australia be excluded entirely, a demand Xenophon attributes to “blind ideology”. This small element of the media deal required some big legislative contortions to implement, revealing a lot about the backroom processes along the way.

The government argued, quite correctly, that the existing media rules were outdated. The big media companies had fleets of lobbyists working overtime trying to get rid of them.

But abolishing even a technologically outdated ban on owning a television and radio station and a newspaper in the same region – and replacing it with far less onerous restrictions – obviously risks worsening the concentration of media ownership in what is already one of the most concentrated media markets in the world.

Asked about this last year, the government cited the existence of new Australian media companies, such as Guardian Australia, as evidence that media diversity was just fine.

“Most Australians would be surprised to know that our media ownership laws ignore the existence of the internet,” the communications minister, Mitch Fifield, said.

“A proliferation of news sources, including online publications like Guardian Australia, mean there is now more diversity than ever before.”

If the existence of our four-year-old Australian company was a justification for scrapping media diversity rules so the biggest print and television companies could better cope with the media industry’s revenue crisis, it seemed reasonable for Xenophon to ask how smaller players, including us, could be helped to manage exactly the same pressures.

At least 2,500 journalism jobs have disappeared in Australia over the past six years, according to the journalists’ union, the MEAA. Social media platforms like Google and Facebook have morphed from technology companies into publishers, swallowing most of the digital advertising revenue that once kept traditional media companies afloat.

Everyone is struggling to find an answer and the media crisis makes it ever harder to do our job of holding governments and institutions to account – a point made by the big companies when they went en masse to Canberra in June to demonstrate the industry’s “unanimous” support for the government’s plan.

The government still had to do a series of deals with the Senate crossbench to get the changes through. The most disturbing was with Pauline Hanson – who thinks all public funding for public broadcasting is a “slush fund” and ABC balance would be best demonstrated by exposing the “hoax” of global warming – to establish an inquiry into whether the ABC is competing too successfully with its commercial rivals.

When Fifield came to do the side-deal with Xenophon, the minister had a non-negotiable condition. It could not apply to Guardian Australia. He’d cited us as a reason that media concentration was no longer a problem, but now he singled us out for exclusion from a package protecting diversity. After long argument, Xenophon agreed.

“The government’s position was that the Guardian Australia’s parent entity was foreign and therefore would not qualify. I do not believe this is relevant. What is relevant is that Australian news stories and analysis are being produced by Australian journalists,” Xenophon said.

“The Hobson’s choice I faced was to lose the $60m package of measures I negotiated for small and regional publishers. It was made clear to me that if Guardian Australia and other so called foreign-based parent entity publications were included, the funding package would fall through.

“I fear that there was narrow, blinkered ideology at play on the part of some Coalition backbenchers and some crossbenchers … You have to ask whether blind ideology, yet again, got in the way of sensible public policy.”

Privately, the government was frank, the “foreign parent company” veto was aimed at Guardian Australia, something that became evident when they selectively waived it for other media groups in last-minute negotiations.

Such a veto didn’t apply when the government gave $30m to Foxtel during earlier media law wheeling and dealing, with the vague purpose of broadcasting more women’ sport and little or no documentation. Foxtel, of course, is half-owned by News Corp Australia, another Australian company with a foreign parent, Rupert Murdoch’s News Corp. (The $30m was widely seen as Foxtel’s “compensation” for the fact that commercial broadcasters had won reductions in their licence fees).

Fifield confirmed to the Senate that News Corp would fail the new foreign-based parent entity “control test” established as a criteria for the three-year Xenophon fund.

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That didn’t matter when it came to the $50m “innovation” part of the fund because it was designed for smaller publications and News Corp and Fairfax were already ineligible. But News Corp-owned regional media did want some of the $8m allocated to help employ trainee journalists, so for that part of the Xenophon deal the criteria became convoluted.

If you are a small metropolitan news organisation with a foreign parent company – like, say, Guardian Australia – you do have to meet the control test and are therefore ineligible, but if you are a regional media organisation with a foreign parent company, like News Corp regionals, the control test is suddenly waived.

The details of the package were announced in a short 11pm Xenophon press release, long after debate on the bill had started, and many senators were still unaware of them even when they voted the next day.

But the Greens leader, Richard Di Natale, concluded it was “hard to escape the fact this was structured in this way … to deliberately exclude the Guardian and other Australian-based international outfits that are indeed holding the government to account … it is hard to escape the conclusion that this was done for anything other than political reasons.”

If the package was really intended to encourage more Australian journalism, there are arguments for Guardian Australia’s inclusion. We employ 80 Australians across our commercial and editorial operations, jobs that didn’t exist four years ago. Our structure means we have no proprietors or shareholders to pay, so every dollar of revenue we earn in Australia is invested in Australian journalism. We can never do as much as we would like, but with seven Walkley awards, numerous scoops and a unique monthly audience of 2.8 million readers, we’re doing OK.

If the government’s objection was really about providing assistance to Australian companies with a foreign parent company, why selectively waive that rule for some?

At the end of this saga, the ABC and SBS face an inquiry that could dramatically curb their journalism and the big players will be able to merge and and better cope with reductions in advertising revenue, but this is also highly likely to increase our already extreme levels of media ownership concentration.

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Regional papers will get a much-needed benefit and some of our smaller commercial competitors such as Crikey, the Monthly and the Saturday Paper will receive up to $1m a year from Xenophon’s fund. All power to their pens. We want independent journalism to thrive.

As for us, we’ll keep doing what we’ve done from the start – the very best Australian journalism that we can.

We’d already responded to the advertising revenue crisis by asking our readers to help fund our work, and in your generous tens of thousands you have. If you value our independent Australian journalism, the kind of journalism the government seems to want less of, we’re relying on you now more than ever.