Puttnam was influential in setting up Ofcom

He is currently leading a parliamentary rebellion against the liberalisation of cross-media ownership laws.

Speaking ahead of the Communication Bill's second reading, Lord Puttnam said he would oppose "in every respect" the provision which would allow Channel 5 to be taken over by a large newspaper group such as Rupert Murdoch's News International.

Undercapitalised? Channel 5's principal shareholder is five times the size of Granada and Carlton put together. Lord Puttnam

"This is the issue of cross media ownership," he said.

"The existing regulations, thoughtfully inserted into the 1990 Act by the then Conservative government and avidly supported by my own party, have until now sensibly prohibited this form of market dominance.

"Where did this unwelcome provision come from? Who on earth sought it?" he asked.

"Try as we might the Joint Scrutiny Committee could never get any sensible answer beyond an unattractive repetition of free market dogma and the muddled pleas that poor undercapitalised Channel 5 was just to small to worry about.

"Undercapitalised? It's principle shareholder is five times the size of Granada and Carlton put together."

Lord Puttnam argued that the government risks swapping "the best free broadcast media in the world", for the will of the world's most powerful media groups.

He said Ofcom, the new regulator to be introduced by the bill, was not guaranteed sufficient funding to be strong enough.

Lord Puttnam has the support of Liberal Democrat peers and needs only to win over a few Conservative rebels for the government to be defeated on the issue.

Competition

Former BBC director general Lord Birt said that in the short term Ofcom needed to use its powers to open up the system to competition at every point.

The backbench peer said a "key challenge" for the new regulator must be to "ensure that if we are to maintain a national competitive advantage that there is sufficient competition to drive infrastructure, penetration and innovation."

Ofcom's chairman, Lord Currie of Marylebone, strongly commended the bill and urged peers not to delay it or make major amendments.

"It is a source of considerable comfort to me that the bill is in such good health," said Lord Currie, who was a Labour peer until his appointment to Ofcom last year.

He said Ofcom would set up a "transparent and clearly defined regime" on newspaper mergers that was "not unduly burdensome, and which gives the industry maximum predictability."