The Government will seek the public’s views on whether evasion of the TV licence should be decriminalised.
Culture Secretary Baroness Morgan said it was time to “think carefully” about whether the TV licence fee was relevant in the modern media landscape.
The public consultation will evaluate whether criminal sanctions for the non-payment of the licence fee should be replaced by an alternative enforcement scheme.
Baroness Morgan said: “Many people consider it wrong that you can be imprisoned for not paying for your TV licence and that its enforcement punishes the vulnerable.
“Today we are launching a public consultation to make sure we have a fair and proportionate approach to licence fee penalties and payments, that protects those most in need in society.”
In 2018, more than 121,000 people were convicted and sentenced for licence fee evasion and issued with an average fine of £176.
Last year there were about 26 million active TV licences in the UK, generating an income of £3.69 billion for the BBC.
Any move to decriminalise licence fee evasion will not come into effect until April 2022, according to the Department for Digital Culture, Media and Sport (DCMS).
The department said: “The consultation does not ask for views on any other changes to the TV licence and is clear decriminalisation of TV licence fee evasion would have an impact on BBC funding.”
A spokesman for the BBC said any proposals to decriminalise non-payment of the licence fee should be considered at the time of the settlement.
He added: “A detailed Government-commissioned review found the current system to be the fairest and most effective.
“It did not recommend change – in part because the current system is effective in ensuring payment with very few people ever going to prison.”
In 2018 five people in England and Wales went to prison for not paying fines, he said, adding: “There is a question about what issue this repeat consultation is trying to solve.”
Any changes “must be fair to law-abiding licence fee payers and delivered in a way that doesn’t fundamentally undermine the BBC’s ability to deliver the services they love,” he said.
Last week, Match Of The Day host Gary Lineker said that buying a TV licence should not be compulsory.
But last month the outgoing director-general of the BBC Lord Tony Hall defended the licence fee model, saying that “because we are funded by everyone, we must offer something outstanding for everyone”.
Baroness Morgan will also announce a flexible payment scheme for the TV licence, which will allow “vulnerable people, including those over the age of 75” to split the bill into instalments.
She said the payment scheme “will help prepare the BBC and public service broadcasting for the future and make sure it continues to work for our society, our economy and the public which funds it”.
The scheme, which is called the Simple Payment Plan, began being trialled in 2018.
While monthly payment plans are already offered by TV Licensing, they currently bill customers at a higher rate during the first six months of their first year rather than splitting the cost evenly throughout the year.
Shadow culture secretary Tracy Brabin said: “Decriminalising non-payment of the licence fee will leave the corporation without a predictable income and potentially hundreds of millions of pounds short.
“It’s shameful that the Conservative government is forcing over 75s to pay the licence fee and the new ‘Simple Payment Plan’ scheme doesn’t make up for that.”
The move has been criticised by Age UK’s charity director Caroline Abrahams, who said that the new payment scheme will not necessarily help those who find it difficult to afford a licence.
She said: “If you are a pensioner in the position of struggling to pay an extra £157.50 a year for a licence, being able to spread out your payments will not change the fact that the sum is simply unaffordable on your low fixed income.”