Quote (the capitals are mine):
"If you use a TV OR ANY OTHER DEVICE to receive or record TV programmes (for example, a VCR, set-top box, DVD recorder or PC with a broadcast card) - you need a TV Licence. You are required by law to have one."
Source:
http://www.tvlicensing.co.uk/information/index.jsp#link1
See my response to your question in I&T for further information about internet TV.
Chris
PS: If you're prepared to put up with the poor quality of internet feeds, wouldn't it just be easier to switch to watching a black-&-white portable and then you'd only have to pay �42 per year (at current rates) for your TV licence?
PPS: The current licence fee works out at �2.43 per week. For this we get BBC1, BBC2, BBC3, BBC4, CBBC, CBeebies, BBC News 24, BBC Parliament, Radio 1, 1Xtra, Radio 2, Radio 3, Radio 4, Radio 5 Live, 5 Live Sports Extra, BBC6 Music, BBC7, BBC Asian Net, BBC Radio Scotland, BBC Radio Wales, BBC Radio Ulster, about 50 other local & regional stations and the biggest & most authoritative website in the world. Even if it goes up to nearer �3 per week it still seems great value to me!