The telco bought exclusive rights to 39 of the 64 games for a reported $8 million but multiple games have been disrupted by technological failures since the tournament kicked off six days ago.
"Optus made a commitment to cover the event and they have not been able to deliver on that commitment".
SBS will show all matches until the end of the group stage.
SBS will also be broadcasting the semi-finals and the final.
Optus's move came after Malcolm Turnbull stepped into the debate on Monday and shortly afterwards Lew, announced that SBS would broadcast all games live and free for a 48-hour period while it worked on the technical issues.
This would allow streaming of all World Cup games, including the final stages of the tournament, as well as access to the first three rounds of the English Premier League.
Having initially permitted SBS to screen an additional four matches to rectify the problem, Optus on Wednesday extended that permission until the end of the group matches on June 29.More news: Big Ballin': Jay-Z Signs On As Puma’s President Of Basketball Operations
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Optus chief executive Allen Lew said: "Optus have tried hard to deliver an exceptional viewing experience and deeply regret this has not been the case for all Australians. Effective tonight, all Australians will have choice".
Last night Optus announced it would simulcast 48 hours of matches with SBS after viewers encountered connection issues and drop outs during games over the weekend.
OPTUS has waved the white flag and surrendered all exclusive rights to the World Cup group stages following the streaming disaster with SBS coming to their rescue yet again.
While the consumer watchdog the ACCC was believed to be investigating what happened, the offer by Optus to refund its customers will go some way to mitigating the backlash the telco has experienced this week, but will cost it dearly. "So we have very clear experience with streaming".
The issue has turned into a major political fight in Canberra, with Labor attempting to blame funding cuts by the Turnbull government for SBS not taking on the whole tournament, a claim rejected by the Coalition, which pointed to a deal in which SBS is will broadcast some EPL games in return.
If you wanted to watch games not being shown by SBS, you needed to buy into Optus' $15 per month "Optus Sport" package, which would get you a month of sport and happened to include the 2018 FIFA World Cup, among others. Speaking earlier in the week, Lew said he was confident the brand would recover.