New EU rules on retaining phone records could be agreed by the end of the year.

European justice and security commissioner Franco Frattini said he hoped that a new proposal on data retention would be approved by governments and members of the European Parliament by the end of December.

Frattini said the proposal from the Commission would "harmonise 25 hugely different regimes". Retaining data is "essential" for investigating terrorists, he claimed, particularly in tracking mobile phones.

"We can't allow safe havens in Europe because it's possible to escape to countries which don't have (data retention) rules in place", he said. At the same time, the new proposal represented a balance between the right to security and the right to a private life and the protection of personal data, Frattini said.

Under the proposal, telcos will have to collect and store phone record data for up to 12 months and ISPs for up to six months. The rules cover data such as time, location and destination of calls but not their content. The data could be accessed by law enforcement agencies from other member states on request.

The measure is a key part of the EU's efforts to step up the fight on terrorism and has received extra political impetus in the wake of the public transport bombings in London and Madrid where the use of mobile phone records played a crucial role in the tracking and arrest of terrorist suspects.

Fifteen of the EU's 25 member states have no mandatory data retention legislation while half of those who do have such policies have not put in place all the laws needed to enforce the rules. For the others, the length of retention period varies from three months to four years while the scope of data covered ranges widely. In some cases, for example, Internet data does not fall under the retention rules.

Frattini highlighted the fact that operators would be compensated for the additional costs incurred by the new rules as a way of heading off criticism from telecom companies about the burden the legislation would impose. "Industry has and has had some preoccupations but we have taken them into account." he said.

But industry representatives still expressed reservations. "While we welcome the Commission's proposal for compensation in the case of measures relating to surveillance it only deals with a fraction of the costs," said one representative of a major telco who asked not to be named. He added that the industry also wanted to discuss which data would be covered by the rules, highlighting problems involving unsuccessful calls and location-based data - which allow the tracking of mobiles. "This would be a clear burden for us," he said.

European fixed line operators, ISPs, mobile service providers and cable service operators issued a joint statement in early September, saying that industry had "grave doubts about the feasibility and effectiveness of the intended data retention requirements". The measures being proposed were disproportionate, unduly burdensome and in some cases impossible to comply with, the statement said.