Why always assume that the alternative to the licence fee is adverts? There's no TV licence in Spain but TVe doesn't have ads. It is crap but I don't think that's anything to do with how it's funded
It's a public service that we do all use to varying extents. We can argue to the hilt about how impartial it's political coverage is, but it's certainly more impartial than C4 or Sky. At least it officially strives to achieve impartiality. What about things like lower league football coverage? Yes other companies might get the rights to show the goals on a Saturday night, but you can read a match report of every league game in England (and probably all the Conference ones as well?) every week. Who would take up that job if the BBC went? No-one.
Also, those with kids will know the programming done by the BBC is a zillion times better than anything else. It's wholesome, educational etc. Flick over to Nick Jr, Disney or the kids shows on ITV/C5 and they're just trash, which are mostly nothing more than an advert for the toys that supplement them. And if you don't have kids, you'll still benefit from a society with well-educated kids.
Get rid of the licence and then we'll see what happens to standards. At present, I would suggest that the standard bearer is BBC News and that is what ITV and Sky compete against. If that standard is affected, isn't the likelihood that news standards will drop in the battle for ratings!
Also, at the moment we have many free to air sports events. Open Golf, FA Cup final, Grand National, Wimbledon. What's the likelihood that with the BBC going commercial those will be open to the highest bidder. I used to enjoy F1 but never see a race now.