The Pentagon and SpaceX are locked in a dispute over the pricing of Starlink services, which have played a key role in U.S. military operations during the conflict with Iran.
According to a Reuters report, SpaceX executives met Pentagon officials shortly after the U.S. conducted its strikes against Iran. The executives argued that the military had been paying about $5,000 for connection per terminal while effectively using a higher tier of service worth closer to $25,000, implying they should be paying more.
The report, which cites people familiar with the matter, also mentions a dispute over Starlink’s use on LUCAS suicide drones — a cheap U.S. model comparable to Iran’s Shahed that can circle over a target area before diving to detonate on impact. SpaceX argued the LUCAS drones were operating under conditions that aligned more closely with its aviation tier subscription rather than a lower priced land or mobility service.
READ: Microsoft and Starlink partner to improve internet connectivity around the world (February 25, 2026)
Pentagon officials argued that the $25,000 price tag — a monthly fee — was designed for aircraft, not kamikaze drones that used Starlink connection for a matter of minutes or hours, according to one of the sources.
The Pentagon, which is seeking to help Iranian citizens bypass government-imposed communications blackouts, has also been at odds with SpaceX over pricing for a plan to provide the populace direct-to-cell connections with Starlink akin to 5G service.
This dispute underscores the Pentagon’s growing reliance on SpaceX’s Starlink. SpaceX is owned and led by billionaire Elon Musk, who used to lead the Trump’s administration Department of Government Efficiency (DOGE) before a public fallout with the president. This also comes ahead of SpaceX upcoming IPO, which could potentially make Musk a trillionaire.
The Pentagon ended up agreeing to pay the increased cost for the LUCAS drone, nearly doubling the price from about $30,000 per unit.
READ: Jeff Bezos’ Blue Origin targets Starlink with new satellite initiative (January 22, 2026)
The report mentioned that a Pentagon official said the office responsible for acquiring the terminals, the Commercial Satellite Communications Office, is working to find other competitors. However, there seems to be no alternative to Starlink which has become prominent in modern warfare since 2022, the beginning of Russia-Ukraine war.
The satellite network provides global coverage, enabling battlefield communications and precision targeting even in remote areas. SpaceX’s constellation of roughly 10,000 satellites accounts for more than 60% of those in orbit, making it much larger than the constellations being built by other companies, including OneWeb and Amazon Leo.
Starlink recently saw criticism from the U.S. navy after an outage left two dozen unmanned surface vessels bobbing off the California coast, disrupting communications and halting operations for almost an hour, during a test. This incident, which involved drones intended to bolster U.S. military options in a conflict with China, was one of several Navy test disruptions linked to SpaceX’s Starlink that left operators unable to connect with autonomous boats.