Option 1. I don't understand the argument that advances are pushing up the prices of anytime and off-peak. It's a comparison not dissimilar to the anti-piracy of each download is a lost sale. It's only true for those who have to travel regardless and have enough notice to get an advance
Advance tickets are quota controlled purposely to put bums on seats on services which would otherwise be empty. Of course they get it wrong sometimes and for the most part people are happy to plan long distance services months in advance (hence why you can't find any good advances for next week on popular services!)
1- Most people who travel have to travel regardless. Very few travel for the fun of it. In fact, in my case, travel for the fun of it has stopped, because of the costs of off peak tickets. In fact some travel which I need to make has switched to car.
2- Advance tickets are obviously better for TOCs. All the money goes directly to them. They can make their advertisements sound better. They can control numbers better. However, with all these extra advance tickets available nowadays, how can they survive the loss in revenue? Answer, by increasing the costs of other tickets. Its the only way of surviving the loss in revenue caused by the massive numbers of advances now sold.
People are then literally pushed into buying advance tickets, sometimes by the forceful and unfair advertising of them. This leads TOCs to make out as if advance fares are loved, so they introduce even more. Result, off peak tickets rise even more. Its a vicious cycle, but one the TOCs love, for the reasons outlined above. But in truth, a lot of people dont love them, but are forced into buying them.
Look at all these people getting on the wrong train. A lot of them shouldnt have got an advance ticket. OK, some of these would do so no matter what, but some have only chosen it because off peaks are too expensive.
Look at the people on here who are worried about what time a match may finish or a plane may get in. They are sometimes advised to buy 2 or 3 advance tickets for around the time in question. That is someone who is pushed into buying advance tickets when really they dont want to. This last reason has got to show perfectly how advances arent actually as loved as they are made out to be, but are forced onto people.
Now if you reduce drastically (or scrap as Flamingo says) the number of advance tickets, you could then lower the price of off peak tickets. These people mentioned above are now much more likely to happily purchase an off peak ticket. Afterall, its the ticket they really want. Result? An increse in revenue because they buy a more expensive ticket.
I myself wouldnt scrap them altogether. But i would reduce the number of them available.
Also, whats the percentage increase on advance tickets between the end of BR and now, compared to the percentage increase on off peak and anytime tickets? I dont know for sure, but id bet the advances havent gone up by as much. OK so this wont all be down to the number of advances, but some of it will be.