The License fee cannot be justified in a market that is increasingly favouring subscription services such as Netflix and Amazon Prime, both of which do not require a TV license.
Yes there are parts of the BBC that are not competitive and would likely be forced to close if they became commercial.
Your second paragraph contradicts your first.
Are amazon prime or netflix going to set up a local radio station in my town that covers local news, sport and community events? The commercial station moved to Buckinghamshire then London to cut costs and the company that owns the local newspaper is heavily in debt and could go pop at any second.
The license fee is only a problem because somebody decided it was rather than the other issues facing the country. Yeah you could hide the cost away in general taxation and hope that keeps angry people on social media happy but let's face it, even if the BBC is gone they'll still claim the media in this country is too tory/"leftie" and will never be happy.
There is no contradiction. Services that would be commercially viable such as BBC One or Radio 2 would be funded by advertising or subscription depending on the needs of the service and its audience. Services that would not be commercially viable such as Radio 3 or perhaps your local radio station could be funded by a grant-in-aid from the government instead of the license fee. Nobody with any brain cells would expect Amazon or Netflix to run a local radio station.
I do agree with your point about it not really being a pressing issue compared to others and you are right, whatever happens not everyone will be happy about it.
The whole point of the licence fee is
to fund programmes and services that would not be commercially viable
Any comparison with Netflix is always going to be fatally flawed.
Yet much of the BBC output WOULD be commercially viable and is competitive against commercial alternatives already. Strictly regularly trounces the competition in the ratings. I very much doubt that would change if there were commercial breaks during the programme.
I was not comparing the BBC to Netflix. The market seems to becoming more subscription based and moving away from broadcast television as ratings continue their downhill trend. The government is not going to force people to pay the license fee to watch those subscription services, as it would open a whole can of worms surrounding sites like Youtube, you'd need a license fee just to access the internet and that would go down like a bucket of cold sick.
So either they stick with the status quo and just allow the BBC to slowly die through the loss of fee payers or they free the BBC from the shackles of the License Fee and allow it to sink or swim in the commercial arena. With the BBC continuing to produce PSB programmes with funding directly from the government, with as others have said, 'safeguards' in place to prevent the government of the day snatching away the money when they dislike the current editorial stance.