I have also been having this same problem as well, and I am on an Alltel friends and family plan. I currently have an Iphone 5S, and I was able to replicate this same problem on an Iphone 5 as well (so it's not the phone hardware that's causing this). My 5S was in repair for a broken screen, and I used a friends (unactivated) Iphone 5 as a loaner. I factory reset the 5, and transferred my SIM card from the 5S, activated and setup the phone, and still got "Extended" showing on the 5 and horrible battery life too.
While it may not have any effect on service, it certainly has a major effect on battery life! I have taken all the battery saving tips out there and used them, and I'm still at or below 20% at the end of each day with below average usage time.