Officials at the Department of Culture, Media and Sport are currently discussing a proposal to change the system which stops commercial radio companies from owning more than a handful of stations.
The move would free radio groups including Capital Radio, Emap - owners of the Kiss and Melody stations - and GWR, which owns Classic FM, to expand rapidly by taking over smaller stations.
A Whitehall official yesterday confirmed that Chris Smith, the Culture Secretary, would meet representatives from the commercial radio industry tomorrow to discuss the proposed changes. However, he said the Government had no immediate plans to change ownership rules.
The industry is expected to argue that ownership restrictions need to be lifted in order to allow the creation of larger companies which can fund the investment required to launch digital radio services.
Until now, radio companies have been prevented from expanding by rules which restrict the number of "points" that each group can control. Points are awarded to a radio station based on the geographical area covered by its broadcasts, but are not related to the number of listeners it has. As a result, Xfm, an alternative London rock station which has just a few hundred thousand listeners, carries as many points as Capital FM, the capital's most popular commercial station.
The radio industry has long lobbied for the points system to be abolished, but believed that any change would require an amendment to the 1990 Broadcasting Act. However, civil servants now think that the changes could be made without the need for legislation - opening the way for restrictions to be lifted as early as next year.
The proposed changes involve awarding points to the BBC's plethora of national and local radio stations. This would massively increase the total number of points, and dilute the share of the points owned by the commercial broadcasters.
This change could be introduced by a Proposal to Parliament, which would have to be passed by both Houses but would not need to be entered on to the statute book.
However, civil servants warn the proposal could be blocked by a legal hurdle because the changes require the BBC to be awarded licences by the Radio Authority - a move specifically forbidden by current legislation.
Radio operators argue that not including the BBC in calculations of the radio market is an anomaly. By comparison, the rules on television ownership which limit the share of the market that an ITV company can control include the BBC in the calculations.
Whitehall officials are understood to be sympathetic to radio companies' problems. They also recognise that radio companies cannot wait until new legislation on media ownership is introduced, probably in the next Parliament.
The reason is that the Government is currently preparing for the introduction of digital radio, which will allow a whole host of new stations as well as added services.
The Radio Authority, the industry watchdog, has invited applications from radio companies to run the national digital licences by the end of the month. However, the cost of setting up and running the service has prompted large groupsto shy away from submitting a bid.
Analysts believe that converting the existing national and local radio stations will require an investment of as much as pounds 35m a year.