The BBC has lowered its bid for a rise in the cost of the licence fee from 2.3% to 1.8% above inflation.
The government's licence fee decision is expected later this year
Rival broadcasters had criticised as excessive the original bid, which sought a licence price of £180 by 2013.
Director General Mark Thompson said a rise was still needed to meet the costs of switchover to digital TV.
He also said plans to move Five Live, and the sports and children's departments to Salford would be shelved if the fee settlement was inadequate.
The reduced licence fee bid would mean a price of £149 by 2013 in today's terms - below the £162.66 which a government-funded report found was the level the public would be willing to pay.
The Department for Culture, Media and Sport has yet to decide the level of the licence fee settlement, which is expected to be announced at the end of the year.
There has been speculation as to whether the government will sanction a settlement above or below inflation, which is likely to take effect next April.
Mr Thompson said in a speech in London that there would be difficult decisions ahead in the event of a low licence fee settlement, which he said needed to be "realistic" to fund the ambitious digital switchover.
"This is a project of great size and intricacy. The risks are formidable. If it is under-resourced it will fail. It's a simple as that - and the failure will impact on many millions of households.
"We can't do everything. We can't rob existing core services to pay for switchover," added Mr Thompson
He added that only a BBC which did no more than it was currently doing would warrant a reduction in funding.
Mr Thompson predicted that the new BBC Trust, which replaces the board of governors, would only approve the relocation of thousands of staff from London to Salford, near Manchester, if the plan "could demonstrate robust value for money, and the licence fee settlement made it affordable".
"In the event of a low settlement, I would not even be able to recommend it to them," he said.
"We would have to find other, more modest, ways of increasing our investment in the north."
Conservative shadow culture secretary Hugo Swire said the government had to publish the BBC's revised estimates "if the licence fee payers are to have any confidence in the final licence fee settlement".
"This is a public service broadcaster and as such should offer the best possible value for money, not what the viewing public will put up with," he said.
Liberal Democrat media spokesman Don Foster criticised the Treasury for failing to decide what had to be included in the licence fee, adding: "It's equally disturbing that we don't know for how long the licence fee agreement will last.
"Too much uncertainty remains and could blight the prospects of the BBC remaining the world's pre-eminent public service broadcaster."
Labour chairwoman Hazel Blears, the MP for Salford, said it was "vital" that the BBC relocation plan went ahead.
"It would be a missed opportunity of epic proportions if the BBC board renege on their promises," she said.
The new agreement about the licence fee is unlikely to cover the entire 10-year period of the next BBC Charter, which comes into effect next year.