"If it is not, we will have no alternative but to actively look at moving at least some of our services overseas."
The UK Government's "snooping bill" is making internet companies consider moving their businesses overseas.
This week, three internet service providers said they were contemplating relocating outside the UK to ensure that the e-mail messages and surfing histories of customers are not spied upon.
The Regulation of Investigatory Powers (RIP) Bill also came under fire from web luminary Esther Dyson, who said that if it became law it would turn Britain into a police state.
Net service providers Poptel, GreenNet and ClaraNet are all making contingency plans to site their businesses offshore if the RIP Bill passes into UK law.
The trio said worries about the snooping powers that the bill gives the police was forcing their decision.
Repressive regimes
Poptel chair and founder Shaun Fensom said the company was worried that it would not be able to guarantee the integrity of communications for some of its members who are regularly in conflict with the government.
Poptel counts the TUC and many other non-profit campaigning organisations among its customers
"The RIP Bill should be withdrawn and rethought," he said.
"If it is not, we will have no alternative but to actively look at moving at least some of our services overseas."
In an interview in The Times newspaper, net expert Esther Dyson also called for the Bill to be scrapped.
She said the powers it gave the government were more like those seen in repressive regimes.
This week, the RIP Bill reaches its report stage in the House of Lords.
This will see the emergence of definitions of many of the terms in the Bill that have been criticised by civil liberty campaigners for their imprecision.
Caspar Bowden, director of the Foundation for Information Policy Research, and one of the keenest critics of the Bill, says the proposed definitions still give government the power to collect information on surfers.
The government is also rumoured to be ready to help companies with the cost of complying with the bill and setting up the network of links to any monitoring stations.