In its submission to the Department of Culture, Media and Sport, ISBA recommends that broadcasters should be able to apply for funds based on their public service commitments.
In order for the BBC to remain wholly funded by public money via the TV licence fee, it would need to have its public service remit tightened, the report recommends.
However, an alternative is that the BBC's public service shackles should be removed altogether, allowing it to behave completely commercially and competitively.
While pointing out that the BBC's current funding through a licence fee is inequitable, ISBA stops short of promoting the idea that the BBC should be wholly funded by advertising revenue and believes the former solution is a more realistic remedy than the latter.
ISBA, led by the director of media and advertising affairs, Bob Wootton, joins the IPA in claiming that the BBC now operates well beyond its acceptable limits and that this is affecting fair competition.
ISBA and the IPA both call for the governance of the BBC to change, with the board of governors replaced by a board of directors and with output regulated by Ofcom.
"For advertisers, the commercial media, and most especially we suggest for the viewer-customers who fund the BBC, maintaining the status quo is not an option," an ISBA spokesman said.