The Internet Society of Australia has slammed a $131 million government funding package to help telcos implement the data retention regime.
The funding falls short of estimated capital cost of establishing the regime, which will require telcos to retain a range of customer data for two years.
The Internet Society believes the funding gap means telcos will pass the cost of data retention on to end users.
A government-commissioned PricewaterhouseCoopers study pegged the capital cost of implementing the regime at between $188.8 million and $319.1 million.
"PwC has advised that this range represents a reliable and appropriate cost figure that they are reasonably confident in based on the robustness of its calculations," stated a submission from the Attorney-General's Department to the parliamentary inquiry into data retention.
"The Department is of the view that costs for the majority of the industry has been captured," the submission stated.
The PricewaterhouseCoopers study "estimated that, even if there were to be no government funding, the average cost over 10 years would equate to between $1.83 and $6.12 per customer per annum, with a median price of $3.98 per customer per annum," Attorney-General George Brandis said during Senate debate on the legislation.
The government's proposed funding package is "less than half the amount the government itself estimated as the cost to industry when the data retention bill was presented to parliament," said the CEO of the Internet Society, Laurie Patton.
Patton said his organisation, along with telco group Communications Alliance, had been advising the Attorney-General's Department of the potential impact on ISPs of the new regime.
"The feedback we are giving them is demonstrating that the Government has greatly underestimated the work involved," Patton said.
"Therefore, we believe that it is too early to be capping the amount of money allocated to the industry's cost recovery."
"The government's original cost estimate was not based on widespread industry consultation and the Internet Society is concerned that the costs have been significantly underestimated, especially in respect of small to medium sized ISPs that don't have the resources to undertake the work in-house and therefore will be required to pay for external assistance," Patton said.
The Internet Society CEO said the government should commit to topping up the funding available to ISPs if there is a significant shortfall.
The Coalition and the Labor party passed the data retention legislation in March.
Telcos must start retaining data from 13 October, unless they submit a Data Retention Implementation Plan and request a longer period to implement systems to capture the relevant data.