Australian communications businesses have questioned the effectiveness of the government’s planned $400m data retention laws, given that popular overseas-based services such as Gmail, Hotmail, Facebook and Skype would not be captured.

Other “substantial” exemptions from the proposed scheme include services provided within corporate and university networks and free Wi-Fi in public places.

The retention laws – described by Tony Abbott as “a very important piece of crime-fighting equipment” and necessary to avoid “a form of unilateral disarmament in the face of criminals” – would apply only to Australian-based telecommunications providers.

Under laws to be debated by parliament next month, telcos and internet service providers (ISPs) would be obliged to store customer records – such as the sender, recipient and time of emails and phone calls using the services the companies directly operate – for two years.

John Stanton, the chief executive of the Communications Alliance representing Australian industry, said “large gaps in the scheme” included details of interactions through widely used “over-the-top” services such as Gmail, Hotmail, Facebook and Skype.

“It’s clear that there is ample opportunity for customers to avoid their communications being captured by the scheme,” he said.

“It’s also of concern to Australian providers that offshore operators are not captured and will therefore bear none of the costs that will fall on Australian providers while having a natural competitive advantage over local service providers.

“The large gaps in the scheme raise questions about whether it is proportionate. In other words, given the avenues available to avoid the scheme does this cost and impost stack up against the additional national security it will generate?”

Abbott referred specifically to Skype during a visit to the child protection organisation Bravehearts on the Gold Coast on Wednesday, when he hinted that the total cost of implementing the data retention scheme was likely to be up to $400m.

“Until quite recently, we had a relatively small number of telecommunications providers and they kept very comprehensive records for quite some considerable period of time,” the prime minister said.

“What we’ve seen in recent times is an explosion of different providers and a whole lot of different modes of communication. For instance, a lot of people don’t even use mobile phones that much these days, they use Skype and things like that. So, metadata and its retention is more important than ever if we are going to be able to track what criminals are doing.”

The parliamentary joint committee on intelligence and security is due to complete its report on the proposed laws by the end of next week, paving the way for parliamentary debate in March.

The inquiry into the bill has been told that an Australian ISP that provided its own email or webmail services would have to keep information about those emails. But that same company would not have to record interactions using “over-the-top” services they did not directly provide to their customers – such as Gmail and Hotmail.

The Greens senator Scott Ludlam said the exclusions would drive customers offshore and he saw increasing signs the government’s “poorly thought-out” proposal was “headed for the scrapheap”.

The submission by the Attorney General’s Department to the security committee said the data retention obligations applied to service providers within Australia’s territorial jurisdiction and were “subject to a number of substantial exceptions and an exemptions regime”.

“The department acknowledges that there are a number of service providers that have a significant presence in the Australian telecommunications market that do not own or operate such infrastructure in Australia, and that therefore will not be covered by data retention obligations, including the major social media providers,” the submission said.

“However, many companies based in foreign jurisdictions are subject to data retention laws in those jurisdictions, reducing the need for Australian legislation. Additionally, as a party to the Cybercrime Convention, Australian law enforcement agencies are able to obtain expedited assistance from 43 countries to obtain telecommunications data held in those countries that is relevant to Australian investigations.”

The department added that “attempting to impose extraterritorial data retention obligations would give rise to significant jurisdictional and conflict-of-laws issues”.

Under the proposed laws, Australian telcos and ISPs were “only required to keep records about the services they themselves provide and operate” and not preserve “records about communications sent or received using third-party communications services running ‘over-the-top’ of their network or service”.

Internet and intranet services provided within corporate and university networks would not be covered, the department said. The obligations also would “not apply to services that are provided only to a single place, or to places in the same area, such as free Wi-Fi access provided in restaurants, libraries or a campus”.

The department said these two exemptions reflected “an assessment that the law enforcement and national security benefit of imposing data retention obligations” on these networks and services “would be outweighed by the privacy and compliance burden”.

In the past two weeks, Abbott has ratcheted up his calls for the data retention laws to be passed “as quickly as is humanly possible” in March.

Key details remain unclear, including how much of the cost of implementing the scheme will be paid for by the government and the final dataset of what must be captured.

Labor’s communications spokesman, Jason Clare, said the government must be upfront if it was “intending on imposing a new internet tax on households to pay for this”.

The opposition leader, Bill Shorten, said he was dedicated to national security but recognised “that if we rush these matters we may well be creating unforeseen consequences and problems”. Labor voted with the Coalition on other security law changes last year.