Home Office proposals for a voluntary scheme of data retention, requiring phone companies and internet service providers to store communications data for up to a year would result in "inevitable failure", the all-party Internet Group said.
The MPs urged the government to follow the US by dropping demands for the mass-retention of communications data, in favour of a data preservation scheme, that would preserve only those records needed for criminal investigations.
The recommendations follow concerns that the government's data retention proposals - introduced after the 11 September attacks taken together with existing communications monitoring laws - amount to an irreconcilable breach of human rights law.
The government has also come under fire from internet service providers who believe the data retention proposals will leave them open to legal challenges. They are also concerned that the high costs of storing and retrieving data will not be met with adequate financial support from government.
The MPs urge the government to rethink its approach, and to work with law enforcement agencies and European governments to develop an alternative approach based on data preservation.
"We do not believe that it is practical to retain all communications data on the off-chance that it will be useful one day," the MPs say in a 40-page report.
Data preservation has already shown to be successful in the UK, with the police congratulating phone and internet companies for voluntarily retaining communications data for the police following the 11 September attacks.
Data preservation is less burdensome and less costly to business and consumers as well as being less harmful to public confidence, the MPs argue.
The government should resist the temptation to solve the problems with its voluntary data retention scheme by making the scheme compulsory. This would do immense damage to communication service providers and would not achieve the goals of law enforcement, the report said.
Read the report >>