I know the license fee and the whole BBC in general is a cultural institution among most Brits, but I'm going to be a cultural boor and admit that I don't understand it at all.
I know I'll get lots rushing to defend the honour of the BBC just on the basis that it's such an ingrained part of the culture there, but honestly, when I lived there it made no sense to me. Other countries have programming without advertisements that are sponsored by viewers and such, but these are mostly dedicated to educational programmes or the like. I've never seen anywhere where the taxpayers are subsidising a channel (well, a series of channels, really) that compete with private sector businesses with programming that is purely entertainment.
It's just a bizarre concept, frankly, if you didn't grow up with it. Why, other than pure inertia, should one channel benefit from public funds (and I know, you're not required to pay the license fee, exactly, but let's be honest, almost everyone has to) while the others don't? I don't want to come across as a tax-slashing Thatcherite, but honestly the whole idea doesn't make any sense. If the BBC were solely dedicated to putting out educational programmes and things that benefit the public interest, then I can see it, but Top Gear and its ilk doesn't benefit society in any way that I can see, and thus should be forced to find its own source of revenue.