MPs have recommended that the government bring down the £180 cost of the licence fee to encourage more people to pay for it.
They made their recommendation after it emerged that 94 per cent of the country use the broadcaster but only 80 per cent have a licence.
They also urged the corporation to expand the fee to all devices including mobiles and laptops rather than link it only to television sets.
And ministers should keep open the option of getting rid of the fee and instead levying a charge on all households to guarantee the corporation's future funding, they added.
Their recommendations come in a report by the Commons digital, culture, media and sport committee on the BBC's Royal Charter review.
The Government is due to decide how the corporation will be governed, regulated and funded from 2028 onwards.
'The best next step is for the Government to reform the licence fee so it reflects modern media consumption and is no longer linked to a television set,' the committee concluded.
'This would be an easier sell to licence fee payers if expanding the base is paired with a drop in the individual cost. There are strong arguments for a household levy but it would be a difficult model to introduce in the short term given the significant implementation challenges.'
MPs have told the BBC to bring down the £180 cost of the licence fee to encourage more people to pay for it
The BBC's director general Matt Brittin told the committee that the corporation had lost between £1.2billion and £1.3billion of licence fee funding over the last ten years.
He said 40 per cent of this was due to a reduction in the number of households paying the charge.
In its report, the committee revealed that some evidence suggested that fewer than 40 per cent of households would be paying the licence fee by 2037/38.
'Licence fee evasion appears to be widespread,' it added, with 27million households owning a television but fewer than 24million licences in force.
The BBC itself said that a 'reformed model that requires more households to contribute at a lower cost could strengthen fairness and sustainability'.
MPs also recommended that the charter review is scrapped and made permanent to avoid calling into question the BBC's existence every ten years.
They also said the corporation needed to be more independent from political interference.