Placing the blame on police receivers or in the case of Lightsquared “cheap GPS” is overlooking the practical limitations of out of band rejection of strong signals over weak in band signals.
In the case of cheap GPS receivers, good, compliant military receivers suffer no degradation from the proposed lightsquared system. I suspect that the AT&T transmitters are fully compliant, but the older police radios were cheaper to produce by not worrying about interference which at the time was relatively rare.