Major media players continue to dominate online news, current affairs and analysis, despite a proliferation of online news content sources, a government report has found.

The internet has given established Australian media outlets “a vehicle to maintain or actually increase their influence” but has not led to a proliferation in independent sources of news, according to a Communications Department paper.

The report notes that in the eight years to 2013, either News Corp or Fairfax-owned news site have made up the majority of the top ten most popular news websites and “this dominance has been remarkably stable over the period”.

The policy background paper, Media Control and Ownership, has been released as Communications Minister Malcolm Turnbull develops proposals for changing the rules governing Australia’s media.

Turnbull has argued the internet gives people access to many more sources of news and opinion and that technology has rendered current laws obsolete.

He has publicly canvassed changes to media rules that prevent mergers of more than two of three regulated media platforms (commercial TV, commercial radio, print) in one market, or one commercial television licence holder exceeding an area encompassing 75% of the national population.

The paper says people are increasingly able to tailor the news they consume to their interests and have become the “generators” of news coverage.

“In this regard, the online platform has arguably enhanced the access to, and dissemination of, news content in Australia and overseas,” it says.

“As digital technologies further erode the historical delineations between traditional and new media, it is reasonable to expect that online-only news media outlets will play an increasingly prominent role in framing and informing public debate on significant social, cultural, political and economic issues.”

Online news media outlets are not counted within the existing rules.

The dominance of established media online is not unique to Australia, according to the paper, which points to the situation in Britain and the United States.

The trends suggested “that a major impact of the online platform, at least in terms of the more popular news outlets, has been to extend the reach of established news providers.

"This is perhaps not surprising given that consumers tend to gravitate towards the brands, mastheads and commentators they are familiar with and that can provide them with the particular Australian news they are seeking,” it says.

“The growth in the variety of online news services may only serve to reinforce the brands of traditional sources, as they become the easy choice amongst a cloud of alternatives.”

But the paper argues that this does not erode “the general conclusion that the online medium has radically transformed the environment in which news content is produced and consumed, nor the expectation that the online medium will, over time, become an increasingly important driver of news media diversity.

"What it does highlight, however, is that the news genre is in a state of dynamic change and that the diversity-enhancing potential of the online space is yet to be fully realised.”

The paper says repealing the 75% reach rule could lead to consolidation in free-to-air TV. A likely outcome would be the acquisition of, or merger with, one of the metropolitan networks (Seven, Nine and Ten) and one of the affiliated regional networks (respectively, Prime, WIN and Southern Cross Austereo).

This was unlikely to substantially reduce the number of commercial TV broadcasters in the affected markets – a change of ownership in one market would involve replacing one voice with another rather than a reduction.

But there was a question as to whether mergers would lessen local content. Local content requirements were presently in place. A recent investigation had found any extension of this condition would affect broadcasters financially. “The potential loss of existing voices through them failing or exiting the market would inevitably impact media diversity in these markets.”

The paper says that in the majority of licence areas and for the majority of media assets, the “two out of three” rule is not in play.

Only a limited number of media operators are at the limit of this rule – for example Fairfax in Sydney and Melbourne, Seven West Media in Perth, WIN in Wollongong and Southern Cross Austereo in some 26 licence areas.

It also notes that “some of the more significant hypothetical media transactions” could take place under present rules, or occur provided the consolidated entity did not contain certain assets. This is a reference to recurring speculation that News Corp might be interested in the Ten Network, although it has denied this.

The paper also says that while removing the two out of three rule would allow for consolidation within the established media platforms, the extent of actual mergers or acquisitions “may be moderated by the broader financial headwinds facing the established media”.