Telstra can go ahead and build 1800 phone booths with digital advertising screens across Australia without permission from city councils, the Federal Court of Australia has ruled.

JCDecaux and Telstra's revamped payphones have created tension with local councils.

The payphones have 75-inch (190-centimetre) double-sided advertising screens, as well as WiFi and USB charging ports. It is the first major redesign of Telstra payphones since 1983.

Melbourne City Council originally knocked back Telstra's application to display advertising on 81 new payphones it planned to build in a deal with outdoor advertising firm JCDecaux and launched legal action in the Victorian Civil and Administrative Tribunal (VCAT).

Telstra then took the legal dispute against the council to the Federal Court of Australia. The City of Sydney Council and the Brisbane City Council also joined the court case.

Because access to telephones is considered a fundamental public and business need, Telstra has the power to build phone booths without requiring council approval, as long as they are defined as "low-impact facilities."