Waves near the lower hybrid frequency have been observed in association with the diamagnetic current at the inner edge of the ring current (LaBelle et al., this issue). Here we interpret these waves in terms of the modified-two-stream instability, generalized to include two ion components: the cold ions of the background plasma and the hot drifting ring current ions. Solution of the dispersion relation yields a weak instability. Since the waves are Landau damped by the background ions, the instability depends sensitively on the background ion temperature as well as the drift velocity. The general characteristics of the observed waves are determined fairly well by the linear theory. Estimates of the saturation level suggest that the waves saturate due to flattening of the current ion distribution function. ¿ American Geophysical Union 1988