Not to say its a totally awesome idea in terms of features and functionality. The amount of inertia it takes to move away from a proven technology wouldn't let such a system see the light of day.
This would move that decision-making to the client device, which could follow any algorithm the user preferred. There would be no people "working" at such a radio station. It would just be a box out on a hilltop with an antenna, retrieving files from an S3 bucket and spraying them—a bit like a numbers station.
Now, there might be some curation going into what counts as "local content" for the box to download and broadcast, but it could be algorithmic or just economic. Picture something more like the "curation" that Public Access television gets: anyone who wants to show up at the station and book a booth for an hour for a fee can have a "TV show." In the same way, anyone who wanted to hand the maintainer of the box an RSS feed of their podcast could have a "local radio program" that cars could receive.
The key, here, is that there would be an unlimited number of such "local radio programs."
Don't imagine radio as it is today. Imagine driving into the vicinity of a city and "picking up" the YouTube channels of everyone who lives there.
You can build whatever you like on top of that—a hybrid device that will siphon up local OTA content along with arbitrary podcasts when it can find 4G, and then intelligently arrange the combination into linear programming, for example. (Really, though, you're just creating a weird sort of secondary internet that only allows retrieval of files relevant to the local area. In fact, you could make the "radio" into a 4G picocell that actually re-serves said limited internet to your phone, where the OTA content then shows up in your regular podcast app.)
Effectively, this would be the over-the-air equivalent of how pay-per-view (not video-on-demand, the older one) worked, but with the client device then acting as a set-top box to turn the received broadcasts into something equivalent to video-on-demand.
This would also be equivalent to how the http://en.wikipedia.org/wiki/Satellaview received game programs.