Telstra would be unable to make planned upgrades to payphones in a way that might include larger digital advertising hoardings under a push by the City of Sydney.

The practice of attaching digital advertising billboards to payphones flared as an issue of controversy in Melbourne recently. The City of Melbourne council rejected a bid by the telco to install 81 boards on public phones in the CBD, and is reportedly attempting to remove 39 boards already in place.

The City of Sydney council is pushing back against plans by Telstra to install billboards such as these in Melbourne's CBD.

The issue relates to a potential legal mechanism allowing Telstra to install upgraded payphones, which it can also use for digital billboard advertising, without council approval.

It is understood that none of these upgraded payphones has been installed in Sydney.