ISPs and telcos have said storing messages for the Government would incur huge costs for their businesses. If the Government presses ahead with the legislation these costs could be passed on to users.
Prime minister Tony Blair and home secretary David Blunkett are determined to face down peers on the issue despite fears it could prevent the Anti-Terrorism Bill getting on the statute book before Christmas.
Yesterday, a Lords coalition insisted on reducing the scope of the interception and disclosure powers to merely terrorist activities.
But, as Computer Weekly went to press, both 10 Downing Street and the Home Office insisted the provisions would be put back in the Bill in the House of Commons today and forced through the Lords.
A spokesman for the prime minister said there would be no more concessions, after more than 10 Lords defeats.
He said the Bill as a whole is vital to counter terrorism, and pointed out that Conservative party leader Iain Duncan Smith has admitted there are close links between international terrorism and organised crime.