Telstra faces a potential clash with Adelaide City Council if it wants to display third-party advertising on new payphones that have already sparked controversy in the metropolitan area.

Australia's largest telco is upgrading about 140 payphones across metropolitan Adelaide as part of a national program with advertising company JCDecaux.

The new phones offer wi-fi and USB charging points but have drawn controversy interstate due to their large advertising screens, which one South Australian councillor labelled "de facto billboards".

They are 2.64 metres high and 1.09 metres wide but do not require planning approval because they are considered low impact under the federal Telecommunications Act.

Adelaide City Council, however, said Telstra would require council approval for about 50 planned payphone upgrades within its boundaries because Telstra wanted to install third-party ad displays.

"No application fee is required to replace an existing structure if it includes Telstra advertising only," a council spokesperson said.

"However, if third-party advertising is proposed, a development application and a permit is required.

"Council has concerns in relation to the placement, scale and visual impacts of smart hubs within the CBD and North Adelaide."

Workers install an upgraded payphone along Glen Osmond Road. ( ABC Radio Adelaide: Malcolm Sutton )

The installation of 40 upgraded payphones in Melbourne's CBD last year prompted the city's council to pursue a range of measures to halt the rollout of a further 80, including legal action.

City of Melbourne councillor Nicholas Reese said at the time that each payphone in Melbourne would earn about $8,000 in revenue per week, according to his advertising industry sources.

Telstra declined to say how much ad revenue was expected from its upgraded payphones in Adelaide.

Upgrades underway

A Telstra spokesman said about one third of its upgrades were expected to take place in the CBD.

"There is only a small number of sites being constructed at the moment in suburban areas and the majority of locations have not yet been determined."

City of Burnside councillor Julian Carbone criticised installations in his ward along Glen Osmond Road to the CBD's south-west, arguing that Telstra was only installing the payphones for advertising revenue.

He said the day of the payphone had passed and they would hardly be used because most people had mobile phones.

"The whole point of the box being there is all about advertising and nothing about the phone at all," he told ABC Radio Adelaide.

"They are just de facto billboards that happen to have a phone there as well."

Telstra payphones were upgraded in Melbourne last year. ( Supplied: City of Melbourne )

Payphones still used

But Mr Carbone's comments were refuted by members of the public who told the ABC that many people still used payphones, particularly those who were vulnerable or poverty-stricken.

The Telstra spokesman said 13 million calls were made from payphones last year, including 200,000 to triple-0.

He admitted there had been a slight decline in payphone numbers over the past decade and said their usage had dropped by about 70 per cent since 2011.

Individual payphones were used on average for eight calls a day in 2011, he said, compared to two calls a day during 2016-17.

But the spokesman said there were still about 17,000 payphones nationwide and 1,300 in South Australia — 60 per cent of which were in the metropolitan Adelaide area.

"Existing payphones are being converted to the new-generation design," he said.

"It is unknown at this stage if any payphone sites are expected to be added or relocated in Adelaide."

A spokesman for the Local Government Association of SA said councils had "limited say in their design or placement" due to federal legislation.

"This is an emerging issue that the LGA will be monitoring, and we will carefully consider any feedback we receive from our member councils about the impact that these facilities are having on road and footpath users."