The cost of implementing the new communications data bill will be up to £1.8 billion over 10 years, the government has revealed.
The amount includes the cost of reimbursing telecommunication service providers "for any costs of complying" with the legislation.
Police and intelligence agencies will be able to access communications data – which includes details such as what website individuals have visited and who they emailed, but not the actual content of exchanges – thanks to proposals made in the new communications data bill, published today.
According to the Home Office, the legislation will require communication service providers, when requested to do so, to retain and store communications records that they might not already keep.
Analysts have previously pointed out that this could raise concerns about data storage capabilities and infrastructure costs for telcos, which the government has attempted to allay by saying it will pay these costs.
"The programme to ensure the availability of communications data by telecommunications operators and for the obtaining of such data by law enforcement agencies and relevant public authorities, is estimated to lead to an increase in public expenditure of up to £1.8 billion over 10 years from 2011/12.
"Benefits from this investment are estimated to be £5 billion to £6.2 billion over the same period," the Home Office revealed in its publication of the draft communications data bill.
"The largest categories of benefits are direct financial benefits arising mainly from preventing revenue loss through tax fraud and facilitating the seizure of criminal assets."
In its impact assessment of the bill, the Home Office estimated that the cost to telcos to implement suitable systems to capture, retain and transmit data – which the government would refund - would be £859 million over 10 years.
The costs were based on the assumption that communications traffic will continue to grow, with the total volume of internet traffic increasing by a factor of 10 over the next 10 years. They also assume that data storage costs will continue to decrease by 25 percent per annum, and take into account the fact that telcos will have to retain communications data for up to 12 months.
As well as including the estimated costs of processing additional management information to allow the Information Commissioner and Interception of Communications Commissioner to oversee the use of communications data effectively, the costs cover the operating expenses of the new systems, such as staff training.
It also includes £170 million for the extension of existing legislative requirements under the EU Data Retention Directive, which requires some retention of specific IP data.
The costs are also at risk of increasing, however, due to unexpected technical complexity of the systems required.
The Home Office has also not allowed for VAT or depreciation costs.
Nonetheless, it argued that the £1.8 billion cost was not significant in the wider costs of policing.
"Alternative methods of investigation, such as directed surveillance and undercover officers, cost significantly more than communications data, do not provide the same level of benefit and are very often more intrusive.
"The proposed 10-year investment in communications data capabilities of £1.8 billion compares with an annual cost of policing alone of £14 billion," the Home Office said.