Queenstown Lakes District Council says telephone and internet access has been restored to 5000 customers.
A contractor damaged a Telecom fibre optic cable earlier on Thursday while working at the Bendemeer pipeline project at Lake Hayes.
The council's general engeneering manager, Mark Kunath, says the damage has now been repaired. Customers in Arrowtown, Gibbston and Wanaka were affected.
Mr Kunath says everyone has taken the neccessary precautions and though council regrets the incident, it will not pay for any damages.
Mr Kunath says people should contact their private insurers if they have suffered any losses.