They might be cutting cost now, but it is not cutting costs for them in the long run. They should've used satellite receivers or some kind of dual-mode cellular transceiver for digital and analog access. In many places, especially in urban areas, digital reception is much better than analog because carriers haven't been adding analog channels to their new towers for years. This means that analog service is quite spotty in many areas today while digital is already much better.
The latest OnStar is digital - CDMA2000 1X: http://onstar.internetpressroom.com/prr_releases_detail.cfm?id=266