This is exactly what I said in a previous thread - that they were demanding development time from him for free. Levison comes across as a very reasonably guy who made every reasonable effort to comply.
The feds do routinely pay service providers to cover their compliance costs, but I guess the price was just too high in this case.
At minimum it would be reasonable for them to cover both flat development, storage, transmission, and system costs, as well as opportunity costs for all involved. If you make me stop what I'm working on to build your pet project of the day, it's costing more than just my time to build your pet project, but also the time and delay that are being imposed on my other priorities.
It's a good thing that months of work by a team of federal prosecutors is valued at less than $3500. Otherwise it might be considered wasteful!
I think he was trying to slow them down. He asked that amount for only one person, while FBI wanted free access for everything. He might've known they either wouldn't accept it, or if they did, only for that guy (which could be somewhat reasonable with a proper warrant), but they'd definitely wouldn't pay $3,000 each of his hundreds of thousands of his clients.
The FBI asked for everything, but did not have a warrant for it, though the judge was evidently too much of a bird brain to tell the difference.