The main compliance cost will be adhering to a new voluntary statutory approvals scheme for companies that want to offer electronic signature services to the businesses and the public.
Encryption services that can verify that the electronic signature on a transaction is genuine lie at the heart of e-commerce.
Ministers fear that unless individuals are confident that their unique electronic signatures cannot be tampered with or used by someone else, they will be reluctant to order goods online or send their credit-card details over the Internet. The Bill will give legal recognition for the first time to electronic signatures.
According to estimates published yesterday by the Department of Trade and Industry, the cost of the encryption approvals scheme could be between pounds 10,000 and pounds 30,000 for a medium-sized company and pounds 500,000 for industry overall in the first year. But the cost could be substantially higher, depending on whether an organisation was issuing electronic signature certificates to the public or managing encryption keys for a small number of customers.
Only a handful of organisations, such as BT and the Post Office, now offer encryption services, but as demand grows other organisations such as Internet service providers, banks and trade associations are likely to enter the market.
Publishing the Electronic Communications Bill yesterday, Patricia Hewitt, Minister for Small Business and E-Commerce, forecast that the costs of complying with the Bill would be far outweighed by the benefits it would bring in terms of lower transaction costs and increased sales opportunities. For example, the Government plans to use the powers under the Bill to allow companies to deliver annual reports and proxy votes electronically - a saving of pounds 10 per shareholder in printing and distribution costs alone.
A requirement for individuals to provide a copy of their "electronic key" to the police to help combat cybercrime has been dropped from the Bill. Powers to crack down on Net criminals, such as drug traffickers, terrorists and paedophiles, have also been switched from the e-commerce Bill into a Home Office investigatory powers Bill.