Why is GPS a free service?

GPS was built with military uses in mind during the Cold War. In 1983, Korean Air flight 007 was shot down by Soviet interceptors over Kamchatka when it went off-course. All passengers and crew aboard the civilian flight, including a sitting US congressman, were killed. Amid the ensuing controversy, President Reagan announced that GPS would be made available for free for civilian use to avoid such preventable disasters in the future. So in essence, it took the political momentum from a national tragedy for it to become freely available.

See http://en.wikipedia.org/wiki/Korean_Air_Lines_Flight_007

GPS is a public service made free to access so that the country can collectively improve its knowledge of the technology. As in the case of the internet, this presents an opportunity for the more industrious among us to diversify its application at a faster rate. And when someone succeeds in finding a new and useful purpose for GPS, money is circulated. In the case of the GPS device, the U.S. receives money throughout the production chain: income tax from workers (if assembled in America), sales tax, taxes on transport/shipping operations, business licenses, and likely more.

http://www.america.gov/st/washfile-english/2006/February/20060203125928lcnirellep0.5061609.html