The TV licence does not have a long-term future and is likely to be replaced by a new levy within the next 15 years, a group of MPs has said.
The fee is "becoming harder and harder to justify" given changes in the media, according to the House of Commons Culture, Media and Sport Committee.
The MPs suggested every household could pay a new compulsory levy instead.
The BBC said it agreed the licence fee needed to be modernised.
The select committee's proposals were made in a new report about the future of the BBC.
Committee chairman John Whittingdale said: "In the short term, there appears to be no realistic alternative to the licence fee, but that model is becoming harder and harder to justify and sustain."
In light of changing technology and audience habits, the committee said "we do not see a long-term future for the licence fee in its current form".
Any "profound changes" - such as abolishing the licence fee - should not be rushed, the report said. But it did say the BBC "must prepare for the possibility of a change in the 2020s.
"We recommend that as a minimum the licence fee must be amended to cover catch-up television as soon as possible."
It should also no longer be a criminal offence to avoid paying the licence fee, the report said.
The licence fee currently costs £145.50 per year for every household where people watch or record live TV.
A TV licence is not required to watch catch-up TV, using services such as the BBC iPlayer.
One option to replace the licence fee would be to make some BBC services available by subscription.
But the committee said choosing which programmes remained available subscription-free would require careful thought.
The best alternative to the licence fee, the report concluded, would be a compulsory broadcasting levy paid by all households, regardless of whether they watch TV, or how they watch.
The BBC's director of strategy James Purnell, said it was "a very serious and important report".
He said: "They are saying the licence fee should continue for the next years and think the BBC should continue for the next 10 years when its comes up for charter renewal after the election.
"We actually agree with them that the licence fee should be modernised. We have said this should extend to catch-up services, when people are watching catch-up for example on their tablets.
"They have come up with a more radical solution with a broadcast levy where every household would pay."
Such a system was introduced in Germany in 2013 and would do away with the need to detect and prosecute those who avoid buying a TV licence, the committee said.
Other proposals made by the committee include:
- The BBC Trust should be abolished because it has mishandled crises like the Jimmy Savile scandal and is too close to the BBC management
- Instead, a new Public Service Broadcasting Commission should monitor the corporation's performance, with an ultimate sanction of being able to withhold some funding from the BBC
- Media regulator Ofcom - not the BBC Trust - should be the final arbiter of complaints about the corporation's impartiality and accuracy
- Part of the licence fee (or future broadcasting levy) should be used to support non-BBC public service broadcasting, such as local news and children's programmes
- The planned BBC One +1 channel does not represent "public service value", and the airwaves should be used for something else
- The BBC should no longer attempt to offer "something for everyone" and should not stray into areas that are well catered for by commercial broadcasters
- The BBC World Service must remain strong to ensure the UK does not lose ground to countries like China and Russia in the "global information war"
Mr Whittingdale, the Conservative MP for Maldon, said the BBC had suffered from "a succession of disasters of its own making" in recent years, yet remained "a widely admired and trusted institution".
The committee's report will feed into the negotiations over the corporation's next royal charter, which will begin after the general election in May.
A statement from the BBC Trust, which was set up in 2007 to be the corporation's arms-length regulator, said the report highlighted "a number of issues and challenges that the Trust recognises and that we are seeking to address".
It added: "We agree that there must be robust internal governance and independent regulatory oversight of the BBC. Charter Review will be when this and other issues are debated thoroughly, but we welcome this thoughtful and considered early contribution."