Electrostatic ion cyclotron fluctuations driven by combination of a magnetic-field-aligned electron current and a localized transverse electric field in two-ion-component plasmas are investigated through the use of nonlocal linear theory for a collisionless plasma. The emphasis is on the stability properties of these modes as a function of relative concentration of plasma components. For various characteristic parameters, such as the spatial dimension of the inhomogeneous electric field profile, magnitude of the E¿B velocity, magnitude of the field-aligned current, and temperature ratio &tgr;=Ti/Te, it is shown that in contrast to the homogeneous case of the current-driven ion cyclotron mode, the ion cyclotron modes in the presence of a transverse-velocity shear can be unstable in a significantly wider range of relative concentration ratios. Moreover, positive growth rates are possible for relatively small and even zero values of field-aligned current in the inhomogeneous electric field case. The mode characteristics in the two cases differ significantly. For example, in the inhomogeneous case, the frequency spectrum is broadband including frequencies much smaller than ion gyrofrequency. The relevance of these results to ionospheric observations is discussed.¿ 1997 American Geophysical Union