To chime in on the original question- Yes the satellite broadcasters are well aware of their technical options. They have expert, top quality engineering and the resources to implement their technical design. They are doing what best meets their business objective.
David, yes I recall discussions about satellite radio boosters by engineers.
Reportedly millions of satellite radio listeners in many major metropolitan areas were likely to be hearing a local booster signal rather than a satellite signal. The engineers said satellite radio broadcasters had a general authorization to operate boosters (on the same frequency as the satellite). Public information at the time was harder to find, and this made it a challenge to determine the location of the the boosters. The concern was radio frequency radiation safety at shared antenna sites. Antenna site users need to know if for example, 15 KW ERP at 2 GHz is blowing off an antenna on a pole. That is microwave oven territory. No doubt the authorizations required them to comply with safety guidelines, but as a practical matter knowledge of a site and common sense may prevail. 2 GHz antennas are more subtle than a multi bay FM antenna and may not be clearly a risk.
About the audio quality part- given the cost and logistics of back hauling the satellite modulating signal to boosters, I don't know how they did it. Considering tech at the time, I think most likely the booster modulating signal was exactly the same as the satellite modulating signal. Today they could back haul using the Internet and sync it up without it being a major motion picture.
If the satellite signal spectrum profile is two redundant signals adjacent to each other (like the FM Digital product in use) perhaps they received the satellite on one signal and rebroadcasted it with the booster on the other signal. The band pass isolation filter to make this work would be interesting to see.
An EE specializing in modulation theory might tell us what is more efficient use of radio spectrum within a given channel bandwidth:
1. Two signals that are identical (redundant).
or
2. One signal with more error correction and receiver time buffering.
The answer might be determined by the technology available when the system was originally designed, and the need for future backwards compatibility of the customer devices. If satellite radio or FM Digital radio was designed today, would it be #1 or #2 ?
Riffing on, using my favorite rant- considering that analog AM has two identical side bands, maintaining backwards compatibility, what could today's DSP technology do within a receiver to improve audio quality? Hmm... Two identical signals with a slight amount of frequency diversity. Admittedly it is a minor opportunity, but I bet the cell phone industry has exploited smaller opportunities.