Manx Radio should in future largely be paid for by the BBC and UK government, a Tynwald committee has recommended.
The station is currently jointly funded by the Manx Treasury and advertising.
The committee's "first preference" would be for Manx Radio to be financed by the BBC, UK taxpayers, or both.
The station's managing director Anthony Pugh said he was worried the Manx government wanted too much say over the station's future, while the BBC said it "noted" the report and would study it.
The report, examining the future of public service media provision on the island, makes 11 recommendations that will be considered by the Manx parliament next month.
Its authors suggest the Manx government "pursue negotiations with the UK and BBC" aimed at securing one of three outcomes, in the following order of preference:
- An increase in financial support for Manx Radio "sufficient to provide high quality public service radio... and other media" without the need for "cross-subsidy from commercial income... and substantial financial support from the Isle of Man Government"
- For the BBC to supply enough "high quality locally produced news and other public service content" for use on all platforms by Manx Radio so as to avoid the need for commercial income or Manx government support
- For the BBC to set up a radio station for the Isle of Man "similar to those operating in Jersey and Guernsey" which would allow Manx Radio's public service obligations "to be dismantled" with the removal of public funding
Were agreement not to be reached, the report's "final fallback option" suggests scrapping the licence fee on the Isle of Man and the simultaneous "release of the BBC from any obligation to provide services to the island".
Such a move would "keep some £4.8m per year in the island" and "allow the island to exercise for the first time true self-determination in relation to public service broadcasting".
One of the report's authors, Alex Allinson MHK, told the BBC there was a "popular feeling that residents of the Isle of Man are paying twice for public service broadcasting - through the TV licence to the BBC and then through a (Manx) government grant of £875,000 a year to Manx Radio".
"Whilst Tynwald upheld the importance of public service broadcasting, the way it is funded and provided locally needs to be resolved," he said.
Manx Radio, listened to by nearly half of the island's 84,000 population each week, currently generates the remainder of its budget from advertising.
But this "reliance on commercial advertising [should be] progressively reduced and ultimately removed", the report suggested.
'Level playing field'
And it said the Office of Fair Trading should assess whether Manx Radio's advertising activities were "creating unfair competition" in the radio market.
There needs to be a "level playing field" for rival stations, the report continues, with a tightening of rules which currently allow Manx Radio to charge a premium for adverts broadcast in popular programmes partly funded by taxpayers.
It also suggests legislation should also be passed to ensure public service broadcasters live within their means, with Tynwald having to approve any proposed overspends.
Other recommendations include:
- The definition of "public service broadcasting" should be reworded to distinguish between "mandatory" components including news and distinctly Manx content, and "discretionary" material including entertainment
- The Manx Treasury and the Communications Commission must agree to any changes to publicly funded broadcasting
- "Leapfrogging" the need for Digital Audio Broadcasting (DAB), instead focussing on radio streamed online
Manx Radio last month announced it had made a loss for a third successive year.
Its annual report revealed a loss of £37,975 - an improvement on the previous year when the broadcaster was £82,406 in the red.
Mr Pugh said he was concerned the report was "suggesting the government redefines what a public broadcaster does and that the Reithean principles of informing, educating and entertaining are remodelled and that entertainment goes".
"It flies in the face of some of the true public broadcasting principles that have been set in stone for decades. That government should be very much at arm's length from the broadcasters so that the public whose station this is feel that what they hear is truly independent from government," he said.
"This is a small island we don't have a daily newspaper so Manx radio is very important. We are on 24 hours a day, seven days a week."
A BBC spokesperson said: "We note the committee's recommendations and will now look at them in detail.
"We're committed to serving audiences on the Isle of Man and all licence fee payers."