"People said to us, 'Where on earth will you find enough good Australian music to play 24 hours a day?' "

FBi Radio's co-founder and president, Cass Wilkinson, recalls the station's painful formative years. "Those kinds of comments just made us more determined."

Today, Sydney's youth-oriented community broadcaster celebrates its 10th anniversary: an occasion marked next month with a one-day festival, FBi Turns 10, expected to draw 8000 fans and featuring 35 bands – many of whom come from the thriving local scene that the station continues to support.

Play from FBi has been a significant factor in the success of bands such as the Presets and the Laurels. John Hassell of Seekae, whose acclaimed 2009 debut, The Sound of Trees Falling on People, was named FBi's album of the week, says the station was the "catalyst" for the band's success. "It was basically the beginning of our sales. We hadn't really had any before then," he says.

FBi's commitment to playing 50% Australian music – half of that from Sydney – is instrumental to an identity that also reflects its not-for-profit status (most staff are volunteers) and shoot-from-the-hip aesthetic.

But after a decade on air, the station has become a cultural institution. With a broadcast footprint covering much of the Sydney basin and reaching 250,000 mostly young weekly listeners, FBi is a powerful force among community stations.

From FBi's first track – a cover of the Masters Apprentices' 1970 Oz-rock classic "Turn Up Your Radio," recorded by an ad-hoc ensemble of local talent – a generation of Sydneysiders has grown up with its edgy, forward-thinking sounds as a given; a comfortingly raucous soundtrack.

"It was the radio station I woke up to every morning," Hassell says. "It was pretty much on everywhere – in the car, at home, in the bedroom."

And music fans of all ages still enthuse about it: after 10 years FBi still has the eclecticism and adventure of a US college station but is more professionally presented, with few talk shows or commercials. It's a tale of the plucky, idealistic good guys making it in the dispiriting world of contemporary media.

Getting there was a long struggle. Wilkinson was part of a small group who began lobbying the government in 1994 for the one of the last remaining FM licences in the Sydney area.

Seven years of fundraising and test broadcasts in dodgy fly-by-night studios followed before FBi ("Free Broadcast, Inc.") – was granted the biggest of three licenses, equal to any commercial station.

Two more years passed before it was up and running, finally going on air for good on the morning of 29 August 2003.

The local-music mandate, along with the station's avowed support of the city's arts scene, filled the gap left when Triple J went national in 1989. There was a determination, too, to give more play to genres such as hip-hop, electronica and dance than other rock-oriented stations.

FBi's Dan Zilber, at the time the youngest music director in Australia, oversaw a well-balanced programme that, while diverse, was still identifiable as a brand.

"Listeners want more than they're generally offered, certainly in the commercial media landscape," Zilber says. "There's a stronger appetite than people are given credit for in terms of depth and breadth of new music."

Zilber is still at it, though he's been promoted to general manager of music. "No one's been able to dislodge me; I've been having too much fun." His uncompromising music philosophy remains intact.

Turn the dial to 94.5FM and if you're lucky you might hear the latest single from a big name such as Cut Copy or Flume, but even at peak time you're more likely to encounter something you haven't heard before – clanging garage rock, gritty underground hip-hop, electronic esoterica; generally brand new, often from unsigned local acts. Many presenters have entirely free reign over their playlists.

Sunset, a nightly uninterrupted live DJ set during drive time, is a popular fixture, and FBi Open Day, a monthly event for which up-and-coming bands are invited to visit the station's Alexandria studios to drop off demos and get career advice, has had Cloud Control, the Jezabels, Red Riders and Muscles all pass through its doors.

"If you can get play at FBi, that can set you up for bigger things," says Chad Gillard of Sydney-based label Future Classic. (He also mans the turntables for Sunset every Saturday.)

"It's definitely an important step which 10 years ago we didn't have in Sydney."

Future Classic is the home of the wunderkind electronic producer Flume, who had his demos played on FBi when he was in high school. He now tours as a headliner.

The Laurels also had their early demos aired. "For bands like us, it's just so important," says the bassist, Conor Hannan. "They played all our stuff as soon as we gave it to them. If we didn't have that as a resource, it would have been much more difficult."

But simply being local doesn't guarantee play on the station – the music has to be good. "We're not a charity," Zilber says. "The bands still have to work hard and earn it."

The station is widely acknowledged never to have betrayed its commitment to new music to chase ratings or sponsorship. In fact the founding general manager, Christina Alvarez, who now runs Metro Screen, describes a synergy between the station's no sell-out approach, local culture and sponsor dollars.

"[Our business model] was already a little more strident than what had already been around. We were taking the best of what had existed and pushing it harder… But it was just a way of talking to our target market, and that target market was local music, culture and arts organisations," she says. "So if anything we had more reason to be confident."

Even so there were lean times. Sponsorship and private donations dried up during the 2009 financial crisis. The station survived by running a grassroots "Save FBi" campaign that included dozens of fundraising gigs at local venues.

Things have stabilised since then. And FBi Turns 10 is not only about toasting the first decade; the event is another fundraiser. "If this birthday party goes well, FBi could for the first time be basically debt-free," Zilber says.

The musicians are all donating their talent and the festival will be staffed by volunteers. "We don't do anything on our own. We've had amazing support from the broader music industry."

Wilkinson attributes the station's success to "an incredibly gifted generation of musicians" – as well as a native independent spirit dating back to the community stations of the punk era.

"There's been a revolution in our cultural confidence and therefore our willingness to listen to local music," he says.

A decade of FBi suggests that appetite still remains strong.