Australia should establish a new independent content and communications authority with the authority to encourage competition and compliance, a new government report has urged.

The recommendation, discussed in the Federal Government's Convergence Review Interim Report, takes into account Australia's rapidly changing digital economy and the lack of ability for current regulatory bodies and rules to cope with the change.

According to the report, tablet PCs, which only became widely available two years ago were now outselling laptop computers. Similarly, smartphones now made up a sizable chunk of all phone sales and are forecast to represent 90 per cent of local phone sales in three years.

"The popularity of these connected devices is driven by a wave of new content and applications available from global services that are changing the shape of the Australian content and communications market," the report reads.

"In light of the importance of the digital economy to our future, Australia needs a new communications regulator with the flexibility to make rules and decisions within clearly stated regulatory objectives and with sufficient powers to encourage competition and compliance."

According to the report, the new regulator should have secure funding and cost?recovery mechanisms to enable it to remain independent of government, and have broad-enough powers such that it can encourage media diversity and deal with content-related competition issues.

The powers would complement, rather than by-pass or replace the economy-wide powers of the Australian Competition and Consumer Commission's (ACCC).

"Given the pace of change in the digital economy, the regulator needs to have broad powers to make rules within the policy frameworks determined by parliament," the report reads.

"The regulator should have scope to adopt flexible, managed regulation and to apply self?regulation, co?regulation or direct regulation as the circumstances require. It should also have a range of appropriate sanctions to encourage compliance."

Other recommendations of the Interim Report include changing content rules such that the possession of a licence should no longer be a precondition for the provision of content.

"If regulatory obligations are to be imposed, they should be imposed consistently, irrespective of the delivery platform," the report notes, given the plethora of content now available via PC, smartphones and tablet devices.

The report also recommends that the government develop a common and consistent approach to the allocation and management of both broadcasting and non?broadcasting spectrum.

"In a converged environment where multiple platforms are used to deliver content, the current regulatory distinction between spectrum allocated for broadcasting services and spectrum allocated for other purposes is no longer useful," the report reads.