The Pentagon and Elon Musk's SpaceX sparred over the cost of Starlink satellite services during the U.S. military campaign against Iran, according to a new report.
The disagreements involved satellite connectivity for military drones as well as discussions about restoring communications access inside Iran during the conflict, Reuters detailed.
The dispute unfolded as the United States expanded military operations against Iran. Earlier this month, the agency reported that the war had generated billions of dollars in costs for governments and businesses worldwide, while military planners increasingly relied on drones and satellite communications systems across the region.
SpaceX executives argued that the Pentagon was paying roughly $5,000 per Starlink terminal while receiving a level of service closer to the company's aviation-tier offering, which carries a price tag of about $25,000.
The disagreement centered on the Low-Cost Uncrewed Combat Attack System, or LUCAS, a kamikaze drone deployed during operations against Iranian targets. Pentagon officials reportedly maintained that the higher-priced service was intended for aircraft and not for drones that connected to the network only briefly during missions.
The Pentagon ultimately agreed to SpaceX's proposed increase, a move that nearly doubled the communications cost associated with each LUCAS drone.
The LUCAS system itself emerged from the Pentagon's push to rapidly field lower-cost autonomous weapons. The drone entered combat in Iran only months after being unveiled as part of a broader effort to accelerate military procurement and expand the use of inexpensive unmanned systems. The initiative drew heavily from lessons learned during the Russia-Ukraine war, where drones became a defining feature of the battlefield.
The pricing dispute extended beyond combat operations. Pentagon officials also examined whether Starlink's direct-to-cell technology could help civilians inside Iran communicate after authorities restricted internet access and seized satellite terminals. During those discussions, SpaceX proposed charging up to $500 million to launch the service and an additional $100 million per month to operate it, according to Reuters. The figures reportedly alarmed some defense officials involved in the talks.
The communications issue had already become a sensitive topic inside Iran before the war as Starlink had become an important tool for some Iranians seeking to bypass government internet restrictions, prompting authorities to intensify efforts to jam satellite signals and disrupt service. The news agency said tens of thousands of terminals had entered the country despite official bans.
The latest dispute also highlighted SpaceX's expanding footprint within the U.S. defense establishment. Reuters said SpaceX and its artificial intelligence subsidiary xAI were participating in a classified Pentagon competition focused on autonomous drone swarming technology. The effort is part of a broader military push to integrate artificial intelligence and autonomous systems into future operations.
The Pentagon's reliance on SpaceX has drawn increasing scrutiny in recent months. In April, a Starlink outage disrupted a U.S. Navy test involving unmanned vessels, raising concerns about the risks of depending heavily on a single commercial provider for critical military communications. Despite those concerns, officials told Reuters there are few alternatives capable of matching Starlink's scale and global reach.
SpaceX's importance stems largely from the size of its satellite network. The company operates roughly 10,000 satellites, accounting for more than 60% of all satellites currently in orbit. That dominance has given the company an increasingly influential role in national security programs at a time when military planners view resilient communications networks as essential to modern warfare.
A Pentagon official told Reuters that the department continues to explore alternative satellite communications providers, although the news agency noted that no current competitor offers capabilities comparable to Starlink's global coverage.
