The last time this was tried e.g The Oxford Channel it fizzled out http://www.oxfordmail.co.uk/news/4327259.Digital_shake_up_turns_off_Six_TV/. You will note that they said that they shut it down because it was on analog but you will also note that after nearly 10 years it was still losing money and 'obviously run on a shoestring' according to a viewer.
(I quote) "About 40 people worked at the studios, in Woodstock Road, in 2004 but when the channel closed just two full-time staff were left".
I occasionally saw it, literally (just) saw it - on the screen in the gym with the sound off (available via headphones and a device which I never bothered with). We couldn't get it because we don't have a decent roof aerial - we had analogue cable and then what is now called Freesat From Sky i.e. a Sky box but no subscription (we had a free card from the BBC when they gave them out, which died a few months ago and we haven't bothered to replace it as there's nothing free to view but not unencrypted we care about). Obviously, it wasn't available on satellite, and according to 6 TV (as it was when I asked them), Comtel wouldn't carry it because it was a rival to their own local news - a constantly repeated half hour programme which changed every week or two. The half hour programme was axed when NTL took over from Comtel but 6 TV wasn't added.
So, as I see it there are the following flaws in the theory...
1. No one gives a shit about local news - the "Eight out of 10 consider local news important" may think it is important in some sense but don't intend to actually watch it.
2. Unless Jeremy Hunt is going to compel Virgin, they aren't going to carry it.
3. And obviously anyone with just satellite dishes isn't going to get these stations.
4. The TV transmitters in this country are high power ones on top of hills rather than being conveniently located to serve particular cities (http://tx.mb21.co.uk/mapsys/anatv/index.php)
4a. Obviously, you could build new transmitters if you could find the frequencies, but people would need new aerials that they wouldn't buy.
4b. And are there spare frequencies anyway?
5. I hear there is some modern thing called something like the intertubes, perhaps he should look into that.
6. Did I mention no-one gives a shit about local news?