Internet first became available on a permanent basis to universities in Australia in May 1989, via AARNet. Pegasus Networks was Australia's first public Internet provider in June 1989. The first commercial dial-up Internet Service Provider (ISP) appeared in capital cities soon after, and by the mid-1990s, almost the entire country had a range of choices of dial-up ISPs. Today, Internet access is available through a range of technologies, i.e. hybrid fibre coaxial cable, digital subscriber line (DSL), Integrated Services Digital Network (ISDN) and satellite Internet. In July 2009, the federal government, in partnership with the industrial sector, began rolling out a nationwide fibre-to-the-premises (FTTP) and improved fixed wireless and satellite access through the National Broadband Network. Subsequently, the roll out was downgraded to a Multi-Technology Mix on the promise of it being less expensive and with earlier completion. In October 2020, the federal government announced an upgrade by 2023 of NBN fibre-to-the-node (FTTN) services to FTTP for 2 million households, at a cost of A$3.5 billion.

Australia was recognised as part of the Internet when the .au domain (ccTLD) was delegated to Robert Elz of the Australian Computing Science Network (ACSNet) in March 1986. From then on various universities connected intermittently (mostly via dialup UUCP links) to allow for the sending and receiving of email links and for use by emerging newsgroup facilities. Prior to IP-based connection to the greater Internet, there existed a message-based network, linking academic institutions within Australia, known as ACSNet, using the .oz domain and connected to international networks using other technologies. When Australia was fully integrated into the Internet, this domain was moved under .au to become .oz.au and still exists today.

The first permanent circuit connecting AARNet to ARPANet using TCP/IP over X.25 was established in May 1989. It linked the University of Melbourne with the University of Hawaii via a 2400 bit/s (bits per second) satellite connection. It was later upgraded to 56 kbit/s (kilobits per second), and then 256 kbit/s, at a time during which the US end-point was moved to San Jose at a NASA facility.

In 1992 there were two commercial ISPs competing with one another. DIALix provided services to Perth, and the other was Pegasus Networks in Byron Bay. In late 1994 the Telstra team led by Max Bosotti commenced negotiations to acquire all the assets of AARNet and establish a fully fledged commercial operation. Under AARNet the internet link to the node in Los Angeles consisted of a 1.5 Mbit/s link, accommodating all the dial-up services for Australia. After extensive negotiations with the Australian Vice-Chancellors' Committee (AVCC) Telstra Internet commenced operation out of Canberra on 1 July 1995. Prior to this operation the tariffs charged by the then small internet providers was based on time used on the service. Telstra Internet developed a world first tariff in charging by megabits downloaded, soon acclaimed by the rest of the world which followed suit. Some three months after Telstra Internet became operational a new link to the USA was purchased bringing the capacity to 45 Mbit/s and followed three months later by an additional 45 Mbit/s link such was the growth of the internet in 1995/96.

A further early provider was the not-for-profit Australian Public Access Network Association (APANA). Founded in 1992 by Mark Gregson, APANA ran many small, widely dispersed gratis hosts for bulletin board systems and newsgroups, but developed into a provider of low-cost, non-commercial access to the Internet for its members.

In the mid-late 1990s, Telstra and Optus rolled-out separate cable Internet services, focusing on the east coast. The first broadband service over HFC was around 1995 using the Motorola proprietary protocols. In around 2000 DOCSIS was rolled out then in around 2008 the HFC was upgraded to support 30 Mbit/s. In 2000, the first consumer ADSL services were made available via Telstra Bigpond, at speeds of 256/64 kbit/s (downstream/upstream), 512/128 kbit/s, and 1500/256 kbit/s. Telstra chose to artificially limit all ADSL speeds to a maximum of 1500/256 kbit/s. As ADSL required access to the telephone exchange and the copper line – which only Telstra had – this allowed Telstra to be dominant due to the expense of roll-out for other companies and Telstra's established customer base. Other ISPs followed suit soon after; offering a Telstra Wholesale–based service.^{[citation needed]}

In 1995, the Western Australian Internet Association (WAIA) was formed (now known as the Internet Association of Australia), and in 1997 it launched one of the first peering points in the country with the Western Australian Internet Exchange service.

Gradually, larger ISPs began taking over more of the delivery infrastructure themselves by taking advantage of regulated access to the unconditioned local loop. As well as significantly reducing costs, it gave the service providers complete control of their own service networks, other than the copper pair (phone line from the exchange to the customer). The first competition to Telstra's DSLAMs was provided by then Optus subsidiary XYZed, launching business-grade xDSL services from 50 exchanges in September 2000. Competition in the residential infrastructure market began in 2003, when Adelaide-based ISP Internode installed a DSLAM in the town of Meningie, South Australia. Several other service providers have since begun deploying their own DSLAMs. The presence of non-Telstra DSLAMs allowed the service providers to control the speed of connection, and most offered "uncapped" speeds, allowing the customers to connect at whatever speed their copper pair would allow, up to 8 Mbit/s. Ratification of ADSL2 and ADSL2+ increased the maximum to 12 Mbit/s, then 24 Mbit/s. ^{[citation needed]}