IF a mobile app wanted to show a "heat map" and with where its users were concentrated within a certain area, could it do so by using the GPS coordinates of the phone, provided everyone using the app had already given permission, or would it be too inaccurate as too many users might have location services off? Not for testing purposes but for reporting it back to the user. Something like the "popular times" data for a restaurant on google maps, especially the live data (which, unfortunately, isn't available on their google places api).
There's quite a lot of research into the subject, and the most commonly referenced is from the Pew Research Centre.
In April 2012 it was found that around 35% of users turn location services off.
However, 10% of users is still significant. So to answer your question: No, you can't assume that location services is on.
But I also think that you're assuming that if they have location services on, the location will be accurate. GPS accuracy can vary based on location and time of day, as I found when creating a location-focused app last year.
Most location APIs can give you an approximation of the accuracy of the location data. You should use this value to mitigate inaccurate values, perhaps giving a higher weighting to more accurate values. But that's probably a discussion for StackOverflow :)