Culture Secretary John Whittingdale has insisted he is not on a mission to diminish the BBC.
There are now so many different ways to see programmes that the "idea of linear TV seems very antiquated" for the young, he told the Lords Communications Committee.
MPs on the committee are investigating the BBC Charter renewal and licence fee.
On whether the Charter review could risk damage to the BBC, Mr Whittingdale said: "I am not setting out to diminish the BBC - that has not ever been something I would like to say.
"If you are an arts lover or if you believe in the plurality of the news or if you enjoy high quality nature documentaries - the BBC is good at all those things, but it is not the only player and that is an enormous benefit to the viewer.
"That, in my view, makes it sensible to look at the BBC's place in that landscape as opposed to the landscape which existed 10 years ago, when that choice simply was not there."
Funding is one of the main issues up for debate as part of the BBC's Royal Charter which is due to expire in 2016 and is currently under Government review.
In a settlement reached ahead of the Budget, the BBC agreed to help finance spending cuts by shouldering the cost of free television licences for people aged over 75.
It will cost the BBC an estimated £750 million by 2020, almost a fifth of its current annual income.
Mr Whittingdale told the peers: "One has to keep in mind that the licence fee for a lot of households is not insubstantial and there is no help.
"Every household (aged) under 75 has to pay the flat rate of the licence fee - that is one of the reasons why it is important that value for money is obtained.
"The whole question about future funding... it may well be that certainly for the foreseeable future that the licence fee is the best way - that is something we have asked people to contribute views to.
"I entirely accept that the BBC has benefits. It is an enormous contributor to the success of our creative industries which is something that generates a tremendous amount of wealth for this country. It can have social impact in terms of getting across public health messages.
"It has benefits in terms of the perception of this country overseas and the influence we carry. One should certainly not lose sight of any of those things."
There have been 192,000 responses from the public on the renewal and "the task of assessing these vast number of responses is proving challenging", according to Mr Whittingdale.
Mr Whittingdale said: "It is my hope and intention that we will have a white paper out in the first part of next year and then we will move towards Charter renewal before the expiry."
The committee hopes to produce its report in February.
Mr Whittingdale also defended the decision not to publish findings or minutes from meetings of his advisory panel on the BBC charter review.
He said the eight-person panel, which includes outspoken critics of the corporation such as Ashley Highfield, chief executive of the newspaper group Johnston Press, and the former Channel 5 chief executive Dawn Airey, had no formal role.
He told the committee: "I would want to discuss with (the panel) the general thrust of where we are going.
"They don't have a formal say over (the white paper) and, at the end of the day, it would be up for the Government to decide. They will be providing views, they don't have an authoritative role."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here