GPS has a built-in error for the civilian use, and a higher-accuracy system for military use. The concerns when it was deployed included unwanted parties using GPS as a guidance system component for missile / drone attacks, etc.

This led to the early GPS enabled phones needing an enhancement to their positioning system. The early releases (think car navigation systems) would be tuned to un-do the GPS offsets, but as that was rarely a 100% solution, they would "smart match" to the nearest viable alternative. This is why in many older car systems, you are sometimes registered as being on the feeder road (or a parallel road) until the system can no longer resolve your travel with your map position.

For smart phones, the error was deemed to great to have decent customer satisfaction, so enhancements to GPS came into being. The phones would listen for nearby markers (typically wifi stations) and report them back to a data warehouse, effectively building a dynamic map of all the wifi points. Then one could anchor that map based on non-moving items (like cell phone towers) and obtain fine-grained positioning information by running relative strength matches to the nearest 3 or 5 wifi access points.

The system updates eventually for broadcasters that change ids, are powered off, are relocated, etc. It has error checking built-in to reduce confusion around one or two new / missing / relocated markers.

All of this was driven by customer demand, and the data collection necessary was mentioned in the past. As the maps are unlikely to ever be placed inside of phone devices, and would require intensive storage to duplicate into each phone, as well as intensive bandwidth to update each phone, odds are that the calls to the manufacturers (which are selling "enhanced GPS" positioning systems) will continue for a very long time.

The solution? Pressure the government to release accurate GPS positioning, so industry will see the running of an independent positioning system as redundant and not-cost effective. Then, when you get a position with GPS, you get an accurate position, and you need not send a signal to correlate nearby signals with your true position.

Does it suck? Yes. Is the current system subject to abuse? Yes. Is the current system abused? (I'm a skeptic of human nature, so) Yes, but its abuse patterns seem to be nearly identical to its use patterns, with the difference being that the companies providing this service can use it to help people find their way to the grocery or to help other people find their way to a specific customer.

Qualcom and others have a very vested interest in not abusing the system, as they would lose their competitive edge should the government decide to take action against them. That said, many people worry about the government being the party abusing the system.