Not to hijack a thread, but: this is is why Apple's iOS is such a compelling case. They make it so easy to control access to the location/microphone/etc. in one tab: Settings -> Privacy -> Location Services
I don't know what Google is thinking, but given the current snooping climate you think they'd err on the side of the customer... but they don't.
They released an App Ops-like feature in an Android beta (I think it was KitKat, but don't quote me) and pulled it because it broke compatibility with so many apps.
(It caused an exception to be thrown whenever an app tried to access something that had been locked down by the user. Legacy apps obviously couldn't catch the exception, so typically the app would just crash.)
It seems easy to fix: can't they test the app in the app store and see if it can handle the exception or not, and if it can't, return a dummy (0,0) coordinate?
Actually testing every app sounds like a challenge Google isn't interested in taking on.
There's also the question of whether apps will still behave gracefully when receiving dummy data. Some apps may misbehave in ways such that it's not immediately apparent that the root cause is a permissions issue.