The federal government won a seven-year battle with "shock jock" Howard Stern yesterday after Stern's employer agreed to pay a record $1.71 million to settle allegations that Stern had broadcast "indecent" material.

The payment by Infinity Broadcasting Corp. of New York, which syndicates Stern's morning program, would be by far the largest ever collected from a broadcast company to settle an indecency case. The largest previous one was $25,000 collected from a California radio station in 1990.

The payment was an abrupt turnabout for Infinity, the nation's largest radio company, which has long argued that Stern's program was protected by the Constitution. In the past, it has adamantly resisted efforts by the Federal Communications Commission to collect a mounting series of fines for Stern's program.

Infinity admitted no wrongdoing in the settlement, which ends all FCC actions against it.

Infinity's Washington attorney, Steven Lerman, said the company agreed to the settlement in order to "normalize" its relationship with the FCC now that Congress has deregulated limits on the number of radio stations a company may own.

Infinity, an aggressive buyer, wants to be on good terms with regulators who must approve its station deals, he said. In the past, the pending indecency cases against Infinity had slowed up approval of its acquisitions.

"I don't consider this company to be a wimp," Lerman said. "All the major players {in the radio business} are in an acquisitive state. In that kind of environment, normalization with the FCC makes a lot of sense."

Infinity is also seeking to renew its licenses for WJFK-FM in Manassas and WJFK-AM in Baltimore, according to FCC sources.

Stern's free-form brand of humor and satire has made him a near cult figure among millions of listeners, but has drawn hundreds of complaints from people offended by his occasionally explicit sexual descriptions.

The broadcasts in question included such things as a 1988 Christmas show in which Stern talked about a man playing the piano with his penis and a 1991 program in which Stern joked about masturbating to a picture of Aunt Jemima.

Complaints have led the FCC to levy fines five times against Infinity-owned stations that air Stern's show, including WJFK-FM, but through legal action Infinity has put off paying them. Infinity has also narrowly escaped other penalties, such as losing licenses to operate stations.

The settlement gave FCC officials an opportunity to declare victory over Stern and indecent broadcasts generally. FCC commissioner James Quello, a longtime foe of Stern's, said the settlement "vindicates" the agency's enforcement policies.

The agency had been seeking to collect a total of $1.706 million in fines from Infinity; the settlement actually calls for Infinity to turn over slightly more than that amount to the U.S. Treasury. The FCC judges whether a broadcast is indecent based on a 29-word definition, which states, in part, that stations may not air "language or material that . . . describes sexual or excretory activities or organs" in a "patently offensive manner." Broadcasters and free-speech advocates contend that the policy is vague, and have waged a long legal battle to strike it down.

However, the FCC's case has been bolstered by two recent appeals court decisions. In June, the District Court of Appeals in Washington gave the FCC permission to narrow the number of hours that indecent radio and TV programs can be aired (indecent material is banned during most hours of the day but may be legally aired in late night and predawn hours). The following month, the same court ruled that the FCC's policy of fining stations for indecency violations is constitutional.

"The law was on our side, as we've said all along," FCC Chairman Reed E. Hundt said in an interview. The strength of the commission's case, he added, "was demonstrated by the fact that {Infinity} paid more than 100 cents on the dollar" to settle the disputed fines.

Robert Peters, president of the watchdog group Morality in Media, praised the settlement yesterday. "It certainly sends a message that broadcasting allegedly indecent material can be costly," said Peters, whose organization was instrumental in enacting the indecency policy in 1987.

Infinity executives have privately made efforts to rein in Stern during the past three years, even as the company publicly battled the FCC.

Infinity uses a delay mechanism on Stern's daily live broadcasts to bleep out potentially offensive material, and has one of its executives actively monitoring the program's content. As a result, the FCC's top indecency enforcement officer, Bob Ratcliffe, said Stern's program has not generated an "actionable" complaint about indecency from listeners since early 1994. CAPTION: HOWARD STERN