"the modern day equivalent of steaming open letters that baddies are using to communicate with each other."
No, that level of interception is still protected, but the collection of who you communicate with via Twitter, Facebook, e-mail, etc, is almost like having some 'bug' on your person noting each and every contact you have with others.
When I visited Leningrad in the late 70s, there were few public "bars" but kiosks sold beer to the public. You queued up, they had a limited number of glasses, and when someone finished their drink, their glass was washed and the next customer served. It was, I understood at the time, to limit the opportunity for 'meetings' as there was nowhere to sit and discuss any matter, let alone "plot".
If (as has been stated on radio) the intention is to bring the existing methods of monitoring "up to date" then this will become another costly Government IT project "white elephant" and will have to be abandoned in due course, as having failed.
I use a number of web-based services for sending e-mail. I have potentially millions of e-mail addresses (dozens of domains, each can have millions of different unique mail addresses). To determine who I send (or collect) e-mail to/from would require monitoring of large quantities of data, to see which packets coming through my connections (I have three ISP connections at present, 4 last month).
It would be a significant cost (for the electricity and systems) to my ISPs to sift through GB of data to capture web pages from Google Mail and others, which might be in the middle of significant other data (eg output from LoveFilm) and if I was actually wanting to do something without being snooped on, I'd make my connection completely encrypted through one of the many VPN services. So UK ISPs could only see hundreds of MB of data but not be able to decide which items were me watching a film and which was me sending a text [via the web] or chatting [on Skype] or using e-mail.
The internet was designed with flexibility in mind, and for nearly any type of monitoring, there will be technical "solutions" that make that monitoring difficult or impossible.
However worthy the idea, the implementation will fail, and at a time when funds for social services, education, etc, are being "managed" this is a ridiculous waste of time, energy, and money, if it goes ahead, as it is doomed.
PoppadumPreach - while I appreciate there are more important things to worry about, you shouldn't shrug and ignore this as it amounts to a massive waste of tax payer money, that would be better spent elsewhere. (I'd say the same about Trident and various other projects, but such comments are often unwelcome!)