SpaceX has reportedly been using its competitive advantage to juice revenue from one of it’s largest customers: the US government. Reuters has reported that the company, in the weeks following the start of the Iran War, increased pricing fivefold for the Department of Defense.
That pricing relates to the use of Starlink terminals, which are critical for the use of LUCAS suicide drones. With service originally priced at $5,000 per terminal, the satellite communications provider argued that the government was using a tier of service that was worth five times that amount, at $25,000 per terminal. The Department of Defense, mid-campaign and with no credible alternative in sight, agreed to pay up.
LUCAS suicide drones are a low-cost US munition comparable to Iran’s Shahed that loiters above a target before diving to detonate. At roughly $30,000 per unit before the pricing fight, LUCAS was already cheap by military standards. After agreeing to the $25,000 monthly per-terminal fee, the per-unit cost climbed to nearly $60,000, with satellite connectivity alone driving most of the increase.
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SpaceX’s leverage starts with scale. Its constellation of 10,200 satellites accounts for more than 60% of all spacecraft currently in orbit. The governments Commercial Satellite Communications Office is said to be working to cultivate competitors for satellite terminal contracts, but no near-term alternative at Starlink’s scale exists.
The Pentagon, despite the price increase, is said to be weighing an additional purchase of more than 3,500 Starshield terminal subscriptions, including 100 at the higher-priced aviation tier, the same tier at the heart of the LUCAS pricing fight. But with no credible alternative available on the market currently, the government has little pricing power.
The backdrop for all of it is an IPO. SpaceX generated $11.4 billion in Starlink revenue in 2025, with the US government accounting for roughly 20% of total company revenue — a share the company is actively pushing higher as it positions itself for a public listing expected next month.
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