I just got a Treo 650 smartphone to replace my three-year-old Treo 300. (The 300 was a loyal servant, but its non-replaceable battery was dying.) I’m loving the new gadget. Among its many features (including a replaceable battery), it’s compliant with the FCC’s E911 requirement, under which all cell phone manufacturers and wireless carriers must roll out technology by the end of this year that allows 911 operators to locate people calling from cell phones.

To do that, the folks at Handspring/PalmOne included a GPS chipset in the Treo 650. There’s even a little icon on the screen that shows you the feature is working. (I think you can turn it off if you desire some geographical privacy.) Cool! You’d think that this would allow me to use my phone like a GPS navigator, which would in turn enable all sorts of intriguing location-based services.

Not so fast. According to a subject expert at PalmOne support, GPS and E911 aren’t close bedfellows yet. Meaning, in essence, that the carriers (including my carrier, Sprint PCS) don’t want the device manufacturers to offer any location-based features that they themselves don’t control:

While the network has access to your coordinates during a 911 emergency and also while you have location privacy turned off, there is little handheld-side possibility for the feature yet. The networks will not allow the phone manufacturers to unilaterally do anything with it yet. Until they get their infrastructure together for location based services, I dont think you will be able to bypass getting a GPS system to get coordinates from your current Treo.

There’s one word for this situation: Outrageous. The carriers are holding back innovation out of pure self-interest. If the free market were operating here, there would already be a slew of cool location-based features for your PalmOS, Symbian, or PocketPC-based smartphone.

Until users demand that the carriers unlock the GPS chipsets inside new smartphones, no one will benefit from the promise of location-based services. The only alternative is to wait until the carriers roll out services on their own terms. And does anyone believe that’s going to happen soon?