Programming is considered in the initial application for a LPFM. Applicants submit a generalized programming statement. If you do not submit one, the FCC will ask for one. Most are very generalized.
In the case of multiple applicants, there is a 'point system' used. Among the qualifying points is a promise to broadcast 8 hours of local programming. In one of the seminars conducted by the FCC the question was asked what qualified as local programming. The answer given was that a computer playing music and even a DJ spinning songs did not qualify. As is the case many times with the FCC, a specific answer was not as clear as what was not considered local origination.
While the format is never dictated (except under circumstances of 'obscene' programming), the FCC does expect the applicant to generally describe programming plans and has a way to elevate the applicant as 'better qualified' by adding at least 8 hours of local programming daily.
I can't say the satellite fed stations are skirting the rules. In almost every instance, regardless of origin, the programming is unduplicated and otherwise not available locally. In addition, in many cases the population that, especially in the religious broadcasters, subscribes to the beliefs presented on the station make up a sizable portion of the overall population in the coverage area. For example, a denomination making up 3% of America at large may be 30% in the LPFM coverage area.
With that said, the FCC has tried to lessen the number of applications that are from groups seeking to relegate local programming to a legal ID on a 24/7 satellite feed. I know one guy that did a number of LPFM applications being advised to be on the lookout for a large number of applications coming from any single specific group. By this I mean multiple applications for a specific group and/or denomination where engineering work is offered by the same engineer and the same programming statement.
I think we sometime want to associate programming with the intent of LPFM which was to put some radio frequencies in the hands of local organizations to serve their local communities. Granted, if you do fully local origination, you would certainly be the poster child for LPFM. In the scheme of things, the average LPFM likely has about 20,000 in their 50 dbu, more in more urban settings and much less in some more rural locations. In commercial radio, if a small market station opted for Conservative Talk, for example, they might assemble a group of satellite fed national talk shows to make up their schedule or opt, say for country music, hooking up to a satellite service for programming. They might only have a national network for news, doing no local news whatsoever.
The dividing line can be a bit elusive. One LPFM group contracted with a group owner that offers programming/formats to other clients. The LPFM is voice tracked and fed from a distant location. There are local announcements and weather and high school sports are covered with this station that is in a community that lost their local station in prior years. In fact, they're pretty well loved in the community yet they would not qualify to take that point of the application. Then again, this isn't much different than a commercial station opting for the Jack format or hooking up to satellite for programming.
Consider that most LPFM radio station have very little revenue. $5,000 to $6,000 a YEAR is very common. Typically this is because of a lack of sales knowledge or a non-profit having a different primary agenda where the LPFM is one of several tools they utilize. Many LPFM stations offer Underwriting for pennies per mention because many operators are less than confident about their reach. For many stations underwriting runs about $5 to $10 a week for businesses 'buying' underwriting, akin to the rates charged by the local cable TV system to buy a frame on the Community Channel.