The Federal Court is set to answer whether slapping large digital screens on the back of payphones is "low impact" after Telstra was accused of a "cash grab".
Australia's biggest telco is battling several councils across the country after its first major redesign of the payphone booth in more than three decades.
Councils say Telstra is using loopholes to bypass planning laws and put 75-inch digital screens run by outdoor advertising giant JCDecaux on the back of the booths.
Telstra can install "low impact" equipment without planning approval and believes installing or upgrading payphones fits this rule.
The City of Melbourne has already taken the telco and the ad firm to a Victorian tribunal while the City of Sydney has raised the possibility of the competition watchdog getting involved, given Telstra has a monopoly over payphones.
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Telstra group general counsel Carmel Mulhern said the best path was to take the matter to the Federal Court so there was one judgement that applied across Australia.
"This will avoid the time and cost of court action in other states, and should mean a quicker, consistent outcome," she said in a statement.
City of Sydney Liberal councillor Craig Chung in April queried whether the use of payphones for lucrative commercial ads was anti-competitive and asked Lord Mayor Clover Moore to raise the issue with the federal government.
"It really is just a cash grab," Cr Chung told AAP.
Telstra says the upgraded booths will be critical as cities become more reliant on telecommunications infrastructure and could eventually offer Wi-Fi internet connections, charge phones and host 5G antenna boxes.
