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The new act also opens up the possibility of broadcast advertising being self regulated, in move that has been welcomed by the industry.

The act has been under scrutiny during the past months in the House of Lords, with debate surrounding a number of issues, including the ownership of terrestrial broadcasters Five and ITV by a foreign company.

When it is published later today, the act will see the creation of Ofcom to replace five media regulators. The passing of the act means that a few sticking points arising from the original communications bill, which were aggressively opposed by the House of Lords, have now been ironed out.

Peers, led by Lord Puttnam, had been campaigning against the removal of legislation that prevents foreign ownership of Five. They believe that if Rupert Murdoch, owner of BSkyB and News International, publisher of the Times and The Sun, bought the channel it would give him too much control of the UK media industry.

It is understood that a compromise has been reached, which will see a number of tests applied to a potential takeover of Five that would ensure it would be in the public's interest, according to sources.

A similar test is expected to be applied to a takeover of ITV by a foreign company, because of fears that if a US media giant bought the broadcaster it would fill the schedule with cheap US imports.

Patricia Hewitt, secretary of state for trade and industry, said she believes the act will operate in the public interest, while making the UK media industry more competitive.

She said: "The act delivers significant changes to the regulatory structure, striking the right balance between protecting the interests of consumers and citizens and keeping burdens on industry to a minimum. It will help keep Britain at the forefront of communications."

The introduction of Ofcom will follow later this year. The regulator will replace five existing regulators: the Broadcasting Standards Commission; the Independent Television Commission; Oftel; the Radio Authority; and the Radiocommunications Agency. It will inherit their powers and statutory duties, including increased powers over the BBC.

Tessa Jowell, secretary of state for culture, media and sport, said the act paved the way for the creation of Ofcom.

"But this is only the first step in a far longer process. Ofcom must now deliver a new regulatory system that will be a light touch and unobtrusive wherever possible, but decisive and robust wherever necessary. I have every confidence it has the people, tools and know-how to do this."

The Communications Act allows Ofcom to consider the subject of self regulation of broadcast advertising, which has only been included since the original draft was published in 2000 after intense lobbying by advertising groups.

Jowell said: "I hope the communications industry will take advantage of the considerable opportunities that the deregulation enshrined in this act offers."

ISBA, the body that represents the interests of advertisers, has been working alongside the IPA and the Advertising Association as part of a united advertiser lobby group to ensure that the issue of self regulation of broadcast advertising was given to Ofcom to consider.

A spokesman said the inclusion of the subject in the list of Ofcom's responsibilities would allow the advertising industry to continue discussions with the regulator to "extend advertising self-regulation into broadcast media".

Ian Twinn, ISBA director of public affairs, said: "The development of the Communications Act has involved many twists and turns over the past couple of years. We welcome the act, which we believe sets in place a new regulator with the power and the understanding to oversee a fast-changing sector in the interests of citizens, consumers, broadcasters and advertisers."

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