The BBC needs a 2.3% above inflation hike in its licence fee to give the public what it wants, BBC director general Mark Thompson has told the House of Lords.
The licence fee could rise to as much as £180 in 2013
A Lords committee quizzed Mr Thompson and BBC chairman Michael Grade over BBC proposals which could see the licence fee increase to £180 by 2013.
Mr Grade said the figure was the lowest it could be to meet the public's needs.
The demands of the digital switchover placed the BBC in "unprecedented
circumstances", he added.
Audience research by the BBC as part of a bid to renew its 10-year royal charter showed a demand for fewer repeats, more factual programming and increased local services, the BBC chiefs said.
However, Mr Thompson said 70% of licence fee-payers' demands would be met by cutting costs within the BBC.
"The BBC will seek to ensure it makes savings, meeting the government's targets for efficiencies," said Mr Thompson.
The corporation is cutting 3,780 posts as part of a money-saving exercise.
Mr Thompson said the corporation aimed to make "continuous incremental improvements without costs", but that the broader changes "cannot be achieved by small percentage increases".
He gave as an example of a change for the better the recent critical and popular BBC One hit Bleak House, comparing it to reality TV programming which cost much less to make.
The move to digital marked a "unique event in the evolution of broadcasting" and would prompt increased expenditure to meet government policy, both men argued.
The government has asked the BBC to spearhead the digital switchover, expected to take place in 2012.
Proposals include helping bring digital TV to vulnerable sectors of the population, principally the over-75s and those households where there are people with severe disabilities.
The committee asked why this "targeted help" should be the BBC's job, rather than the role of the government.
But Mr Grade insisted it was "consistent with the BBC's mission to be universally available" across the nation.
He said the corporation was willing to help those on the lowest incomes switch over to digital, providing the cost impact did not result in the need to cut BBC services or threaten the licence fee.
Asked if the sale of analogue spectrum might not be used to fund the digital switchover, Mr Thompson said the decision was a matter for the government, not the BBC.
Mr Thompson also said the planned transfer of some BBC departments to Manchester would cost far less than first thought.
The cost of the move was originally believed to be between £530m-£640m, but this has been revised to £400m.
"We have spent the past few months working on it and have a much clearer level of detail on how Manchester might work," said the director general.
The new figure will reduce fears that the BBC planned to abandon the costly move following charter renewal.
The savings will be made thanks to the creation of a Media Enterprise Zone, in which rival broadcasters, production companies and the BBC could share resources.
Up to 1,500 BBC staff are still set to make the move, expected to take place in 2010.