Tessa Jowell told the BBC that the licence fee would be retained for at least another ten years until 2017 in return for abolishing the Board of Governors. But the Culture Secretary conceded that technological advances would mean that a fee based on “television ownership could become redundant”.

More than six million households have access to high-speed broadband connections and the BBC has begun experimenting with broadcasting video clips over the internet.

A legal loophole highlighted by the communications regulator Ofcom means that viewers could watch television and listen to radio over the internet and mobile devices free, potentially costing the BBC millions of pounds in licence fees.

The Department for Culture, Media and Sport’s Green Paper setting out the BBC’s long-term future proposed a solution that could end the traditional fee.The paper suggested “either a compulsory levy on all households or even on ownership of PCs as well as TVs”. It said that technology might render it difficult to collect and enforce the fee.

Officially, the Government says that changes would not be needed until 2017, when the next BBC royal charter expires. A spokeswoman for the Department for Culture said that it was not worried for now, but insiders said that the department would act if internet viewing took off.

Over the next few years, internet broadcasting is set to increase rapidly as the quality of the images improves. The BBC already broadcasts all its radio stations over the internet, and began broadcasting live coverage of the Olympic Games last summer. The BBC has promised further internet broadcasts and is launching a hand-held viewing device.

Ofcom predicts that more than half of Britain’s households will be watching television over the internet by 2012. Other emerging technologies will allow television to be broadcast direct to mobile phones. The mobile phone company O2 is planning trials this year, with the aim of a commercial service by 2007.

The publication of the paper was accompanied by a warning from Ms Jowell, who said that the BBC must give higher priority to public-interest programming, and not chase “ratings for rating’s sake”.

The BBC welcomed the reforms, which were widely interpreted as a victory for the Chairman Michael Grade, who said that he was “happy to sign up”, but was “slightly regretful” that the governors would be split in two.

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