radioskeptic said:
Why? Because the system adopted in 1961 uses an AM (actually DSBSC) subcarrier for the stereo difference. An FM subcarrier would yield far better performance. Armstrong himself said this:
“This latter method of multiplexing [with an FM subcarrier] has obvious advantages in the reduction of cross modulation between the channels and in the fact that the deviation of the transmitted wave produced by the second channel is constant in extent, an advantage being gained thereby which is somewhat akin to that obtained by frequency, as compared to amplitude, modulation in simplex operation.”
From “A Method of Reducing Disturbances in Radio Signaling by a System of Frequency Modulation,” by Edwin H. Armstrong, Department of Electrical Engineering, Columbia University. Proceedings of the Institute of Radio Engineers, Volume 24, Number 5 (May 1936).
The triangular noise spectrum of FM yields a lot of noise in the range used by the stereo difference signal—far too much noise for an AM signal when the main carrier is weak. An FM subcarrier system, which can use limiters to suppress such noise, is much better.
In theory, an FM stereo subcarrier would have been quieter, but the FCC approved the DSB method (proposed by Zenith and GE) for the following reasons:
1) To offer good separation and signal/noise ratio over a 15 kHz bandwidth, an FM subcarrier would have been so wide as to preclude SCA operation. Many FM stations relied heavily on SCA income from Muzak, etc.
2) Likewise, a continuous L-R subcarrier injection of 50% would have been required, making it necessary for stereo stations to reduce main channel (L+R) modulation by 6 dB. This was a major factor in the decision for obvious reasons. The DSB system, on the other hand, requires only 1 dB reduction to accommodate the 19 kHz pilot because, at any instant, the L+R and L-R components complement one another.
3) At the time this decision was made, the FM method would have required more receiver parts, thereby increasing cost to the consumer.
4) GE/Zenith agreed to a reasonable royalty plan to keep the cost of receivers down. (See paragraph 34 of the document linked blow)
The FCC's 1961 decision document can be found here. ("System 1" refers to the FM subcarrier system proposed by Crosby Labs, while the approved Zenith/GE DSB scheme is called "System 4/4A"):
http://louise.hallikainen.org/BroadcastHistory/uploads/FM_Stereo_Final_RandO.pdf
You'll also find it interesting to read about the background of the man who invented the stereo system proposed by GE, Antal "Tony" Csicsatka:
http://members.cox.net/csicsatka/
It's quite remarkable that the Zenith/GE system has been adopted worldwide. I'd say that the noise reduction scheme employed in the new Sony tuner has practically eliminated any stereo noise penalty -- but it took over 50 years to get to that point.