As long as a piece of string—costing data retention

With the introduction of the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2014 at the end of October and the release of the draft data set, the Government’s proposed data retention scheme is finally beginning to take shape.  However, a significant remaining unknown is the cost of the scheme and how it will be paid.

A joint submission by the Australian Mobile Telecommunications Association and Communications Alliance to the 2012 inquiry by the Parliamentary Joint Committee on Intelligence and Security (PJCIS) into Potential Reforms of Australia’s National Security Legislation estimated the cost of the scheme proposed by the previous Labor Government to be between $100 million for basic data capture and $500–700 million with IP addresses included. iiNet’s upper estimate was $400 million.

Several submissions to the inquiry commented on the potentially high cost of the proposal and questioned why a proper cost-benefit analysis had not been conducted. A number of telecommunications carriers admitted that any additional costs arising from the establishment of a data retention scheme would be passed on to customers.

While the Attorney-General’s Department (AGD) acknowledged at the time that ‘cost is obviously a consideration’, it conceded that it had not done ‘any actual cost modelling’ due to a lack of reliable information with which to work. It also outlined what it saw as ‘three possible cost models: one is that industry pays, one is that government pays and the other one is that the cost is shared, as it currently is, with interception capability arrangements’.

Senator Brandis’ view at the time was that industry should not have to foot the bill:

It seems to me that this is not regulation the cost of which a business would be expected to bare; this is a mandate that a business actually provide a service to government.

Ultimately, the PJCIS recommended that ‘the costs incurred by providers should be reimbursed by the Government’—as occurs today in the UK where ‘it is current Government policy to reimburse 100% of costs for storage of data required to be retained under the legislation’.

When he introduced the Bill on 30 October 2014, the Minister for Communications, Malcolm Turnbull, said that the Government ‘expects to make a substantial contribution to both the cost of implementation and the operation of this scheme’, and announced a working group to examine technical and cost issues. However, the extent to which the Government is prepared to shoulder the financial burden is still somewhat unclear. The AGD, for example, summarises the Government’s position by saying ‘the government has indicated that it is willing to make a reasonable contribution to the upfront capital costs of the scheme’. A leaked Joint Party Room Submission dated the day of the Bill’s introduction, and issued by the Attorney-General, states ‘there will be some cost implications should the Government agree to contribute to the cost of data retention’.

The AGD also states on its website that ‘international experience indicates that the cost of mandatory data retention schemes is small’. However, the £8.4 million estimated cost of the UK’s 2014 revised data retention scheme, for example, is only small because ‘the infrastructure to support the retention and storage of data by Communications Service Providers, and the secure and reliable transmission of data, already exists’—the scheme proposed under the UK’s failed Communications Data Bill (2012) was priced at £1.8 billion over ten years.

It was reported in early October 2014 that an internal Optus memo had estimated the cost of a data retention scheme to be between ‘$30m to $200m-plus, depending on its scope’, and that the Government had commissioned PricewaterhouseCoopers (PwC) to cost the proposal, which led Senator Ludlam to remark ‘the Government has no idea how much its data retention policy will cost and no plan for funding it…’

On 19 November, Senator Ludlam moved that the Government make public the terms of reference for the PwC study and table ‘any report provided by PricewaterhouseCoopers in the calendar year 2014 to the Government concerning the cost of data retention’. On 24 November, the motion was supported (by a majority of ten), although the Government had declared in advance that it would not be supporting the motion, citing commercial confidentiality and market sensitivity. In a statement to parliament, Senator Ludlam said ‘I think it is imperative that the government puts that report into the public domain so that we know what the cost will be’.

In a tabled letter to the President of the Senate dated 25 November 2014, the Attorney-General advised that he was not in a position to comply with the order. Describing the PwC report as ‘an intermediate step in the costings exercise’ the release now of which might prejudice further analysis, Senator Brandis also cited Cabinet and commercial confidentiality, and stated that there were no terms of reference for the PWC study.

In response, on 2 December Senator Ludlam called for a redacted version of the report, or a summary of its findings, to be tabled by 4 December.

Postscript (5 December 2014)
Senator Ludlam’s second motion was also supported but in a tabled letter to the President of the Senate dated 4 December 2014, the Attorney-General advised that he was not in a position to comply with the second order on the grounds that disclosure of the findings of the report ‘would reveal a Cabinet deliberation’. The Attorney-General reiterated the Government’s commitment to ‘further engagement with industry on costs issues’ and noted that PwC is continuing to support the AGD and the working group in that process.


Flagpost is a blog on current issues of interest to members of the Australian Parliament

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