A dispute between the Pentagon and SpaceX over raising the prices of Starlink service during the Iran war

As American bomb drones being directed through Elon Musk’s Starlink network begin to make tangible gains in the war against Iran, senior SpaceX officials have come to the conclusion that the Pentagon must pay more for access to the satellite Internet provided by the company.

Two informed sources and Pentagon documents reviewed by Reuters indicated that SpaceX officials met with department officials within weeks of the US launching the war and told them that the military was paying about $5,000 to connect to each station, while actually using a higher level of service worth closer to $25,000.

Interviews with five people familiar with the matter and the documents concluded that the dispute over the use of the Starlink service in the Low-Cost Bomb Attack Drone (Lucas) aircraft system, which is a cheap American model similar to the Iranian drone (Shahed) that can orbit over the target area before swooping down to explode upon impact, is one of the reasons for growing tension between SpaceX and the Pentagon over Starlink prices in the past few months.

Two of the sources said that the Pentagon, which seeks to help Iranian citizens bypass government-imposed communications blackouts, is also at odds with SpaceX over the pricing of a plan to provide residents with direct connections to mobile phones using Starlink, similar to 5G service.

The continuation of the disputes, which no media outlet has previously disclosed, highlights how the Pentagon’s increasing reliance on SpaceX gives Musk greater influence at an important level in American national security at a time when SpaceX is seeking to increase its revenues before an initial public offering of its shares next month, which may be one of the largest in history.

Unlike the Starlink terminals available to consumers in stores including Walmart, a knowledgeable source explained that SpaceX is selling a military version called Starshield to the Pentagon under an agreement concluded in 2023. The Starshield terminals can connect to both commercial Starlink satellites and a separate, more secure satellite constellation, also called Starshield.

SpaceX says that Lucas drones operate under conditions closer to its flight subscription class, rather than to less expensive ground or transportation service.

One source said Pentagon officials said the $25,000 monthly fee was designed for aircraft and not for bomb-laden drones that use a Starlink connection for minutes or hours.

The Pentagon, which had been ramping up its strikes on Iran, eventually agreed to pay a price increase proposed by SpaceX, nearly doubling the cost of each Lucas drone. The Pentagon initially paid about $30,000 per unit.

A Pentagon official said in a statement that the office responsible for purchasing the stations, the Office of Commercial Satellite Communications, is working to find other competitors.
“The War Department is committed to promoting a competitive environment for commercial satellite communications,” an official said.

Musk described the Reuters report as “misleading” without providing any additional details in a post on X.

He added that the civilian Starlink system had been used inappropriately for “military purposes.” He said in a separate post that the fault lies with “the company,” not the Pentagon.

In a post on X, Pentagon spokesman Sean Parnell said the Reuters report was “false” without providing any additional information.

SpaceX “remains a strong and valuable partner to the War Department,” he wrote.

But no other company offers a comparable alternative to Starlink, which has become a critical tool in modern warfare since the Russo-Ukraine war.

The satellite network provides global coverage, enabling battlefield communications and precise targeting even in remote areas.

SpaceX’s satellite constellation, which consists of about 10,000 satellites, represents more than 60 percent of the satellites in orbit, which far exceeds the constellations built by other companies such as OneWeb and Amazon Leo.