Internet provider iiNet has stopped selling plans on the national broadband network's satellite service, saying it's become clogged.
So many people are now connected to NBN Co's interim satellite that services are "almost unusable" during peak periods, said the company's chief, Michael Malone.
"We could not continue to offer a service markedly below both our own and our customers expectations," he said in a statement, adding that he was "gutted".
The interim satellite is supposed to provide three per cent of Australian homes and businesses with NBN services until NBN Co launches its own satellites in 2015.
But iiNet said NBN Co has failed to provide enough transmission capacity to satisfy user demand.
Mr Malone called on other telcos to follow suit in stopping sales of their satellite plans.
iiNet confirmed the decision would not affect its 8,000 existing satellite customers.
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