Elon Musk's SpaceX Reportedly Raised Pentagon Starlink Costs During Iran War

Elon Musk's SpaceX clashed with the Pentagon over a sharp increase in Starlink satellite service costs during the U.S. war with Iran, according to a report that triggered political blowback.

According to Reuters, SpaceX executives argued the Pentagon had been paying about $5,000 per terminal for Starlink connections used on LUCAS drones, while allegedly using a higher-tier service worth closer to $25,000 per month. The Pentagon ultimately agreed to pay the higher rate, nearly doubling the cost of each drone, says the report, which cited two sources and Pentagon documents.

The dispute centered on LUCAS drones, described as low-cost U.S. suicide drones that can circle a target before diving and detonating. SpaceX reportedly argued the drones were using a service closer to its aviation tier, while Pentagon officials pushed back that the $25,000 monthly fee was meant for aircraft, not drones using Starlink for minutes or hours.

Musk disputed the report on X, calling it "false" without giving details. Pentagon spokesperson Sean Parnell also said the report was "wrong," while calling SpaceX "a strong and valued partner." Reuters reported that neither SpaceX nor the Pentagon provided detailed answers to its questions about the price increase.

The larger issue is the Pentagon's growing dependence on SpaceX. Reuters reported that Starlink has become central to U.S. military communications and drone operations, while SpaceX's constellation of roughly 10,000 satellites accounts for more than 60% of satellites in orbit.

The Pentagon is also considering more than 3,500 additional Starshield terminal subscriptions, including 100 at the higher aviation-tier price, Reuters reported. Starshield is SpaceX's military-focused version of Starlink, built for government and national security users.

The report also said SpaceX proposed charging as much as $500 million to launch direct-to-cell Starlink service for Iranian civilians, plus $100 million a month to operate it, as the U.S. looked for ways to bypass Iranian communications blackouts. Reuters said it could not determine whether an agreement had been reached.