The announcement, due shortly, follows protests from businesses that burgeoning e-commerce will leave Britain because of the crippling costs of installing and maintaining the boxes. Ministers have come up with the offer following talks with the Internet Service Providers Association. Use of the intercept capacity will still require the warrant of the home secretary. The regulation of investigatory powers bill, imposing the requirement on business, is facing attacks in the Lords.
Critics say the bill provides a snoopers' charter for the intelligence services.
The bill also includes powers to compel companies to surrender software keys for encoding private electronic documents. The Home Office minister, Lord Bassam, has sought to allay fears that the security of UK businesses and overseas business partners will be compromised by this requirement. A new amendment tabled by Lord Bassam will require government to keep such keys in a secure place at the highest possible classification. They are likely to be kept at M15 headquarters.