Re: The simplest solution would be abolish license fee monopoly
"I presume you know that C4 is also are free public broadcasters as well?"
Yes, well spotted, that is worth reiterating. Ch4 is a publicly owned company which has a government mandated remit which entitles it to free carriage over the terrestrial airwaves in exchange for production constraints such as UK produced programmes especially from outside London, schools TV and news, so is effectively subsidised. Not sure if that's from the treasury or the licence fee though.
Also @Cody, to answer your first point, it's worth noting that TV Licence money helped fund the start up of the new local TV channels and a lesser amount used to subsidise them annually.