A Federal Government taskforce will consider calls to wind down Australia's payphone network, after the Productivity Commission said it was "past its use-by date".

Key points: Australia's payphone network costs $44 million a year

Australia's payphone network costs $44 million a year Telstra has a 20-year contract to provide it until 2032

Telstra has a 20-year contract to provide it until 2032 More than 99 per cent of the population has access to a mobile network, the Productivity Commission says

The $44 million spent each year to prop up the "anachronistic" payphone network could be better used, the commission said, because mobile phones had transformed people's live and more than 99 per cent of households had access to a mobile network.

"The evidence of the demise of payphones is clear," the commission said in a report.

Federal legislation was introduced in the 1990s, when the telecommunications sector was deregulated, to ensure all Australians had reasonable access to payphones.

Telstra has a 20-year contract, which has a net value of about $3 billion until 2032, to provide that access under what is termed a "universal service obligation" (USO).

"Juxtaposed with the extensive coverage of mobile services, the continuation of a blanket payphones USO cannot be justified from a community-wide perspective," the commission said.

The number of payphones around Australia has almost halved from more than 30,000 to just over 17,000.

The commission said one in three Australian adults now relied solely on their mobile phones.

Communications Minister Mitch Fifield said a departmental taskforce would consider the report.

"Any changes to the USO regulatory environment and contractual arrangements will be implemented in a constructive, careful and considered manner, and will be mindful of the particular needs of regional and remote communities, industry and other stakeholders," he said.

Telstra 'open to negotiations'

The commission also said the Government did not demand enough transparency or accountability from Telstra.

"There is a strong case for winding back Telstra's contractual obligations as soon as practicable," the commission said.

"Importantly, from a community-wide perspective, this would allow for a better targeted allocation of funding to areas of genuine need for some form of community telecommunications service."

The commission said the Government's investment in the National Broadband Network (NBN) would allow people in both city and regional areas access to telecommunications networks.

"For the vast majority (more than 99 per cent) of premises, the combination of the NBN and mobile networks is likely to meet or exceed minimum standards for universal service delivery," the report said.

But it recommended changes to allow the Australian Communications and Media Authority (ACMA) to require the NBN to report on the reliability of its networks.

In a statement, Telstra said it was open to renegotiating its arrangements with the Government.

"We support the view that the Government should consider whether the ongoing payphone obligation is delivering the best value to Australian consumers and communities," it said.

"However there may be payphones in some areas that are still valuable to communities so alternative solutions for these areas will need to be a part of any change.

"If NBN were to take on responsibility for meeting the universal service obligation, it would need to be fully capable of meeting the obligation on a national basis and ensuring all customers continue to receive the same or better level of service."

Figures show the use of payphones in Australia has dropped, while the use of data has increased rapidly. ( Source: Productivity Commission )

Calls to protect regional access

The Australian Communications Consumer Action Network (ACCAN) said it agreed the Government's obligations needed updating.

But it said it was important people were not left worse off, particularly those in regional areas and those still transitioning to mobile phones.

"Phasing out payphones is a real concern for us because there are lots of places where you simply can't use your mobile phone," ACCAN chief executive Theresa Corbin said.

"When you're passing through [regional areas, payphones are used by] travellers, for emergencies, for disasters and also for a lot of vulnerable consumers that only have access to a payphone.

"We really need to take into consideration community expectations and real usage, not just look at the bottom line.

"The reality is, in a country like Australia, we're never going to be able to get full access to mobiles everywhere and we're going to have to have some kind of public phone availability, especially in remote areas."

The National Farmers Federation said it was concerned people living in regional Australia who were reliant on satellite networks and did not have adequate mobile coverage may lose access to phone services.