One of Europe's biggest satellite firms suspended a supply contract with the Irish firm Digiweb yesterday, cutting off hundreds of businesses from the internet.

Digiweb, which holds the largest number of State contracts to supply broadband to Irish schools, said it was doing everything possible to have its satellite broadband service restored.

About 450 firms using Digiweb's broadband satellite service have been unable to use the internet since the Luxembourg firm Satlynx stopped supplying Digiweb on Monday morning.

The outage has also affected up to three of the State-financed group broadband schemes, which were set up to help people in rural areas access broadband.

A Digiweb spokesman confirmed that the firm had told the Government about the problem and had assured it would not affect the schools' project.

The roll out of the €20 million schools project, which was championed by the former Minister for Communications, Dermot Ahern, begins next month with Digiweb holding contracts to supply 1,428 schools with a broadband service. It is understood the Dundalk-based firm is now planning to use a different satellite provider to supply some schools.

Satlynx, which sells broadband services to other telecoms operators, said yesterday it suspended the supply contract with Digiweb because it was in breach of contract terms.

A Satlynx spokesman said it took the action as a last resort.

Digiweb said yesterday that it had no outstanding payments owing to Satlynx and was working to resolve the dispute.

Legal action by both parties is possible if the dispute continues.

Meanwhile, Digiweb is continuing to market satellite broadband services to customers.

Satellite broadband is much more expensive than other types of broadband such as DSL or fixed wireless. But it offers customers in remote locations and in rural areas their only access to the high-speed internet services.

Several Digiweb customers complained yesterday that they were extremely dissatisfied with the lack of information.

Digiweb initially told some firms that they would be reconnected shortly.

Ms Beatrice Hartog, a director of the Cork-based embroidery consultancy firm Bizzee Bee, said she had lost 36 working hours because of the internet outage.