Culture secretary Tessa Jowell has ordered an in-depth examination of the BBC as part of the review process of its charter, which is set to be renewed in 2006.
The scale of the review comes amid increasing calls for the BBC's licence-fee funding and board of governors to be scrapped.
Speaking to senior broadcast figures at the Royal Television Society dinner in Cambridge last night, Jowell said that the review would start almost immediately and be led by Lord Terry Burns, chairman of Abbey National and former Treasury leader.
Jowell said the BBC will face questions about the broadcaster's purpose in relation to the market.
She said: "We need to ask ourselves what we want and expect the BBC to deliver; what range and scale of services it should provide; how it should be positioned in relation to the market; how it should be funded and regulated; and whether it delivers good value for money."
The review process will begin as early as the end of this year when a list of questions will be drawn up by the Department for Culture, Media and Sport. This will be followed by public and industry consultation.
The charter review will then bring together a review by media and communciations industry regulator Ofcom, an investigation by Phillip Graf into the BBC's online offering, and other reports including those into its digital TV and radio services.
Jowell said that she wanted the charter review to be "characterised by vigorous and open debate about the kind of BBC the public want for the future. The BBC is paid for by the British people and it belongs to them".
The review will result in a Green Paper around the end of next year, followed by another round of consultation before a White Paper making recommendations to Parliament and the public. The review process will be concluded by 2006, when the charter is due for renewal.
Jowell's plans for the review come at a particularly sensitive time for the BBC, which faces constant criticism from rivals that it abuses its licence-fee funding.
The licence fee has long been a subject of debate, but it is thought unlikely that it will be abolished.
However, the broadcaster's regulation by its board of governors could be a different story, especially in light of the Hutton Inquiry into the death of David Kelly, which revealed that the BBC governors backed Andrew Gilligan, the journalist at the centre of the issue, without checking the facts.
The board of governors will be rigorously defended by BBC chairman Gavyn Davies, who announced when he took over from Sir Christopher Bland that he would fight to maintain the unique way the BBC was regulated.
Davies admitted, when he gave evidence at the Hutton Inquiry, that the board of governors had backed Gilligan's report on the 'Today' programme without knowing who the source was or checking all the relevant editorial records. They had relied on BBC managers to judge whether the corporation had followed its own guidelines in reporting and broadcasting.
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