Graf, former chief executive of Trinity Mirror, has recommended that BBC Online's remit and objectives should be clearly defined around public purposes. He also says that the regulation of online services should be reinforced by the appointment of two governors, one of whom must have new-media expertise.
There is good news for digital agencies, with Graf recommending that by 2006 the amount of content supplied by external suppliers will be increased to 25%, up from the 13% it spent in 2003.
In the report, Graf criticised some sites such as fantasy football and local what's on listings, for being insufficiently distinctive from commercial alternatives. He also said that any proposed project that is a close call between the balance of public service versus cost, then that project should not be taken ahead.
In response, the BBC has said it is closing Fantasy Football, the central What's On events listings, along with the Surfing portal, the Games portal and Pure Soap.
Overall, Graf said that BBC Online delivered high-quality material and that there is a lot of public affection for the service.
"There are, however, a number of changes which could improve the experience for users, deliver efficiency and ensure that the site effectively reflects BBC Online's priorities."
In a statement today, the BBC said it welcomed the Graf review, with Ashley Highfield, director of new media and technology at the BBC, saying that it would be considered thoroughly.
"This is a solid foundation to build on, especially when taken together with the BBC's vision, as outlined in our recent Building Public Value document, to play a key role in the creation of a fully digital Britain," Highfield said.
The report was commissioned by the Department of Culture, Media and Sport as part of the wider process leading to the BBC Charter review. Culture secretary Tessa Jowell said she was waiting to see how the governors would respond and then she would consider what further action needed to be taken.
The report was also welcomed by the opposition. Julie Kirkbride MP, shadow secretary of state for culture. She said the Conservatives had long been concerned that some of the content on BBC Online has had an adverse effect on competition on the net.
"The way the BBC responds to this report will be the first test of how they apply the so-called 'public value' criteria which Michael Grade outlined last month. It is very important they show their aims for BBC online's content reflect their core public service remit," she said.
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