On the issue of how to cover operational costs of a proposed radio station that would probably not generate substantial advertising revenue, there is the option of subscription based radio. These are stations that are free to air but generate funds from people who take out 'subscriptions' to the station.
Good examples to look at are Australian stations like Triple R FM (
www.rrr.org.au) and PBS FM (
www.pbsfm.org.au). These stations are the 'indie' equivalent to radio and have quality programming, helping to give under-represented music a chance to be heard.
These stations also have regular 'subsciption drives' to help get people to subscibe. There are opportunities for a local station to tie-in with gigs. Simply setting up a little booth to collect subsciptions or donations would work. If the idea appeals to people you'd be surprised at how much support you can receive by counting on your audience.
Artistes themselves I think would be more than glad to contribute to the station in monetary or non-monetary ways. By paying a fee to have the music aired or by participating in shows that help raise funds. Of course to remain ethical it should always be the station approaching the artistes and not the other way round.
Using volunteers to help run the station would significantly reduce the operational costs. And I am sure there will be no lack of people willing to participate. Students are an especially great source, given the experience they stand to gain. The key is to have a sufficient number of people helping out so that the demands on volunteers are not over-stretched. This also helps keep volunteer turnover low.
As for programming, it can be a station dvoted to locally-produced music period. Do not get caught up in what kind of genres or types of music that will be played. Pop, rock, classical, intrumental, even cultural. All can be accomodated into specific programmes that air at different times or on different days. There aren't enough local recordings to do it any other way, anyway.
There are other options other than trying to model a radio station like this after a commercial one. Whether it is traditional, digital, or internet radio doesn't really matter. Getting people to tune-in is far more important.
Gerald Teo