Industry body the Internet Service Providers Association said the code, released on Tuesday, failed to address concerns about the legality of the scheme and the high costs of the equipment needed to store and retrieve records.
"We need to move to a mandatory system. We do not feel a voluntary code will work because it does not give enough comfort to ISPs," said Nick Lansman, secretary general of the ISP Association.
The proposals call for internet and phone companies to store subscriber data for 12 months, records of e-mails and text messages for six months, and web browsing activity for four days.
Critics accused the government of failing to show a business case to justify the costs of storing data or to demonstrate what impact data retention will have on crime figures.
"Our view is that this scheme is designed to fail. The next stage is a compulsory scheme, but the same issues will come up: cost, legality and justification," said Richard Clayton of the Foundation for Information Policy Research.
In contrast, the government's decision to rethink its plans to give a range of government bodies access to e-mail and phone records won widespread approval.
The u-turn followed a public outcry at plans revealed in Computer Weekly last year, which appeared to give organisations from local councils to trading standards bodies the right to view citizens' e-mail and web data.
New proposals released for consultation this week contain a range of safeguards, including a requirement to seek approval from the Interception Commissioner for the release of data; limiting data access to specific purposes; and regular monitoring.