Television news must remain impartial and children should be protected from unsuitable programmes, viewers have told communications regulator Ofcom.
Ratings for BBC Two's Newsnight fell in multi-channel homes
It questioned more than 6,000 households in one of the UK's largest surveys of public service broadcasting.
Viewers said main terrestrial channels lacked innovative programmes and sometimes talked down to viewers.
It was the first stage of a review which could influence the future output of the BBC and commercial broadcasters.
The last five years of programmes were analysed for the wide-ranging review.
Viewers thought the main function of television was to provide entertainment, but that it should also support wider social purposes.
High quality news and information was seen by viewers as being important and well-delivered by broadcasters.
But audiences believed television should do more to provide a safe environment for children watching programmes on the main terrestrial channels.
Ofcom found that people watched fewer arts and religious programmes once they gained access to cable or satellite channels.
Viewers want children protected from unsuitable programmes
Ratings for ITV1 arts series The South Bank Show and BBC Two's Newsnight had fallen by more than half in multi-channel homes.
Meanwhile specialist programmes on topics such as arts and current affairs have been pushed to the edges of peak viewing hours, Ofcom reported.
And while expenditure on programming across the five main terrestrial television channels rose by 8% over the past five years, spending on arts, religion and children's programming fell.
The regulator also said the BBC, ITV, Channel 4 and Five were failing in some of their public service obligations.
It said the BBC needed "to reaffirm its position as the standard-setter for delivering the highest quality public service broadcasting".
And it called for an examination of "different means of sharing existing funding" - including allowing broadcasters to bid for public service broadcasting funding.
Ofcom senior partner Ed Richards, who is leading the review, said: "Viewers have made it clear that public service broadcasting matters. But there are also real issues to overcome, both today and in the future.
"Public service broadcasting will only be sustainable if it produces challenging and popular programming which reaches a significant audience in the digital age."
The BBC welcomed the report, which it said "underlines how viewers value the breadth that public service broadcasting offers them".
"The propositions raised in the report relating to the BBC address similar issues to the questions asked by the Department of Culture Media and Sport last December, and which are at the heart of Charter Review," the BBC stated.
"These and other issues will be addressed in our own publication on Charter Review in June. The BBC will also respond to Ofcom's long-term propositions once we have had time to fully explore the evidence put forward in their report today."
Ofcom also found viewers strongly supported the need for competition between the main terrestrial channels to provide quality programming.
They also preferred minority interests to be represented within mainstream programming rather than in shows aimed specifically at minorities.
The findings by Ofcom, released on Wednesday, will lead into a review of the BBC's charter.
Ofcom was launched last December as a replacement for five media watchdogs including the Independent Television Commission and the Broadcasting Standards Commission.