Negotiations between the Tasmanian Government and IT company SubPartners to build a third fibre-optic cable connecting Tasmania to the mainland have stalled.

Two years ago the Brisbane based company SubPartners invited the Government to chip in $20 million to tap into the latest arm of its global digital cable network.

The company had intended laying a submarine cable from Perth to Sydney and suggested a spur could be built to connect Tasmania either at Hobart or George Town.

It is part of SubPartner's major plan to build the APX-Central (Perth to Sydney), APX-West (Perth to Singapore) and APX-East (Sydney to US) fibre optic submarine cables.

Technology Minister Michael Ferguson commissioned a consultant to assess the business case for $180,000, but SubPartners never followed through.

"I don't think it's really appropriate to be rushing into these things, when there's not yet a proposal before us," Mr Ferguson said.

SubPartners has reportedly experienced delays gaining the necessary permits and securing key customers and investors.

"Until such time as an offer is received from SubPartners, the Government does not have clarity on commercial models or what rights that SubPartners and the Government and/or private investors would have in respect of the operation or resale of data capacity on a Tasmanian branch spur," he said.

Bass Strait cable competition hopes dashed

The lack of progress has dashed industry hopes that the extra cable would create more competition and bring down internet prices.

Consumer groups had also urged the government to invest in the cable to ensure there would be no repeat of the crippling internet speeds caused when the Basslink undersea cable was cut for repairs last month.

A digital consumers group told a Senate inquiry in Hobart on Thursday that the recent cutting of cable led to "seven days of internet hell".

Abe Ydy who makes TV and radio commercials in Launceston saw his work grind to a virtual halt.

"It dramatically slowed down our NBN access, slower than dial-up almost in that we couldn't access any of our cloud-based service," he told The World Today.

"We transferred large amounts of audio, large amounts of data files, we couldn't do any transfer, we could access our FTP programs.

"We essentially couldn't operate, it was like cutting the power so to speak."

He has since switched to Telstra which owns the other fibre-optic cable that connects Tasmania to the mainland.