American multinational software company Microsoft and internet giant Google have told a select committee considering the GCSB companion bill it will stifle innovation and could impact on economic growth.
The bill gives the Government the power to force the companies to provide electronic spy agency, the GCSB, with access to New Zealand's messages and communications carried over their systems.
Currently the obligation rests solely with companies such as Telecom, Chorus and Vodafone.
Google and Microsoft both made submissions today to Parliament's law and order select committee on the Government's Telecommunications Interception Capability and Security Bill.
In Google's submission, the company's New Zealand-based policy manager, Ross Young, said he was puzzled by what the problem was.
He said like most US companies, Google already provides information to New Zealand law enforcement agencies if a valid request is received.
He said interception powers and requests had been limited until now; since 2009 Google had received fewer than 30 requests a year for interception on New Zealanders.
"We are a little confused about what the issue is.
"We actually publish data about these requests - we were the first company to do so."
Mr Young said he believed interception could be legitimate but these should be proportional to the impact on people and their businesses.
He said the new powers under the bill would slow innovation and economic growth that the internet is beginning to support.
Mr Young said the internet had become a key driver of economic growth, and Boston Consultancy Group said it now drives 20 per cent of economic growth.
"The Prime Minister made the joke that New Zealand is the last bus stop on the way to Antarctica, and that means a tool like the internet could have actually been purpose-built for New Zealand. For an isolated market it is the tool that enables us to connect with the rest of the world."
Microsoft's head of corporate affairs Waldo Kuipers said their 3500 registered partners in New Zealand who deliver services locally would have to build additional interception capability into their services.
He said the bill directly conflicted with the Electronic Communications Privacy Act in the US, and Microsoft may need to make a decision on which country's law it close to obey.
"If we received a conflicting legal demand in a country like New Zealand and US law says we may not disclose it because we don't have a binding court order in the US, we would be in a very difficult position because New Zealand law would say disclose, and US law would say don't disclose.
"We haven't faced this situation in New Zealand, and that's where we don't want to go," he said.
Communications and Information Technology Minister Amy Adams said what is able to be intercepted under the legislation is exactly the same was what is there now.
"There is nothing in this legislation that dictates or changes what can be intercepted, by whom and for what purposes. That's all dealt with under other legislation.
"This is simply about the obligations on telco companies and the way in which they make those services available."
Earlier in July Facebook asked the Government for an exemption from a new spying law that could see its two million New Zealand users' messages subject to interception by the GCSB.