The phone group has gone over Ofcom’s head, taking its case to the Government. The move will raise the stakes in an escalating dispute with the regulator over who should foot the £133 million annual maintenance bill for the kiosks, 60 per cent of which are loss-making.

BT is looking to end an historic deal, agreed at the time of its 1984 privatisation, which places sole financial responsibility for the phone boxes at the telecoms group’s door.

The commitment is one of several “universal service obligations” that BT has had to provide since it listed on the London Stock Exchange.

BT had assumed that the boom in mobile phone use would persuade the regulator to relax the arrangement. The company argues that mobile phone operators, such as Vodafone, and local councils should now help to support what is essentially a community service.

But Ofcom seems unwilling to accept BT’s arguments. The regulator has said it is not planning to review the terms of BT’s agreement. Now Ian Livingston, new head of retail at BT, has decided to fight back. He has told Ofcom it is a “nonsense” that BT should pay for the boxes.

One BT insider said: “People seem to forget we are not a social service but a business with shareholders. People actually expect us to keep their local phonebox running because it lights the parish noticeboard.”

In the mid 1990s there were more than 92,000 payphones. The number has been culled over the past year, but only after long, enforced consultation between BT and local groups.

As mobile phones have grown in popularity, the number of calls made from phone boxes has plummeted, almost halving over the past three years. Nearly two thirds of the boxes now run at a loss and overall revenues have dropped more than 40 per cent.

BT’s pay phone unit, part of the BT Retail division, spends an average of £1,914 to maintain the kiosks each year. The total maintenance bill of £133 million equates to one tenth of BT Retail’s annual operating profit.

In other countries the cost of payphones is funded through a levy on all telecoms operators. In Britain the number of alternative commercial payphone service providers has fallen dramatically. BT’s biggest rival is NWP Spectrum, which is not under any obligation to provide the kiosks and can cherrypick the most profitable areas in which to place them.

A spokesman for BT said: “At a time when BT accounts for 37 per cent of UK telecoms revenues, it is clearly a nonsense for BT alone to be charged with funding the entire Universal Service Obligation (USO).”

A spokesman for Ofcom said: “As things stand now there has not been a sufficient shift in the nature of the market or BTs position for us to change the way the USO is funded.” He said, though, that in the “medium term” the regulator was open to alternative ways of funding it.

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