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I talked to a Nextel Exec a few weeks ago about the GPS in their phones.
the way its supposed to work is that when a person makes a cell call to 911
1. the phone will activate GPS upon dialing 911
2. the carrier (not phone) forwards the GPS coordinates to the 911 dispatcher
based on cell tower triangulation and GPS satellites.
3. If the user is moving, the coordinates get updated as such: phone -> carrier -> 911

many idiots are opposed to the e911 GPS since they think they can be tracked every
where they are . if that was the case tens of millions of cell phones would be hitting up
the GPS sats. the satellites will just explode. also if the GPS chip is active then it would
cut down on battery life a bit.
with the steps above, it would be hard to intercept GPS coordinates of a cell
user while talking to 911. and besides its pointless.
the whole system is proprietary for the most part.

another scenario is lets say a terrorist calls in a bomb threat.
any gov. agency (FBI, CIA, Secret Service) can trace the call
with GPS. they are the only ones who have authorization to
and the means to do this.
FBI -*trace: 555.1666*->Carrier->GPS sat->Bad Guy

The system is not 100%. weather, cell service and towers and
the GPS signal being detectable has to be next to idea for it to work.
any one of those things is messed up, then e911GPS is no good.

Extra Reading

Some of the AGPS phones in the UK allow you to get the location of where you are, a little map comes up on screen which is cool. The thing about been able to track terrorists is a bit extreme even though it would in theory be a good idea but they could just use old phones which done have the AGPS chipset in.

We have this. It's kind of cool my friend and myself sometimes work at a 911 Center in PA USA. We can give exact details but yous understand I'm sure. But it's pretty cool with what it does, and very helpful. Someone calls in an accident on a back road and they dont know an address, it takes their cell phone number and we can get them within 15ft of their location, very very helpful for Fire Fighter like myself, Police and EMS.