Conservative calls to cut BBC licence fee funding are "fantasy", the culture secretary said on Wednesday.

In a speech to a Social Market Foundation seminar on public service broadcasting (PSB), Tessa Jowell confirmed that a two year review of the BBC's Royal Charter will begin in 2004.

And while ministers would be happy to hear genuine proposals on the corporation's future funding, Jowell explained, "this [is] a well-worn path and I'm not expecting to be surprised".

The culture secretary has come under fire for ruling out changes to the licence fee - criticism she dismisses.

"Has anyone come up with a formula for replacing the licence fee that would actually work in the circumstances of the next three years?," she asked.

"No."

Attacking the shadow culture secretary, also speaking to the SMF, Jowell argued that Conservative calls for an overhaul of BBC funding were inconsistent with criticism of government targets on digital television.

"There is an irony here," she claimed.

"Many people who have over-reacted to my comments are the same people who tell me that the analogue switch-over period of 2006 to 2010 is not achievable, because too many people will still be happy with their analogue service, principally PSB of course.

"So if the pace of change has slowed, then why fantasise that the licence fee could disappear, effectively in three years time?"

Writing in the FT on Wednesday, Tim Yeo set out Tory plans to cut the licence fee, worth £2.2 billion, and to introduce pay-per-view charges for some BBC services.

"Few people, even within the BBC would claim all its current output constitutes public service broadcasting," he writes.

The shadow culture secretary argues that in return for a more limited role - concentrating on public service broadcasting that complemented rather than competed with commercial TV - the corporation could be freed-up to launch money-making sports and entertainment channels.

"Freedom to develop in this way would give the BBC and its customers more opportunities not less," he said.

Jowell also highlighted the importance of strong regional broadcasting content as the government opens up UK media ownership to global media corporations.

"In a world dominated by large companies with EU, US or global identities, public service broadcasting ensures national and regional production. This is good for jobs, but also good for national and regional cultures, she said.

Again hitting back at critics, she rejected claims that relaxed media ownership laws would lead to "Mctelevison" or bland corporate airwaves.

"There has been speculation that ITV companies, on a course as they are for ever-more consolidation, will move away from their regional identities and their regional commitments.

"There is a view that government, in allowing non-EU ownership would encourage that tendency even further as global players would then import globally-produced programmes into the UK market.

"Let me take this opportunity to stress how inaccurate those views are."

And Jowell warned global media bosses thinking of moving in to UK markets that they would be held to ITV licence commitments to broadcast regional television.

"Any future buyer will know what they will be required to do."