The grammar phenomenon you are referring to is called backshift, used in situations where a sequence of tenses occur in a single clause such as reported speech. In general backshift is needed in such sentences.
Joe said he was going to the mall.
When Joe is speaking, the content of his speech is "I am going to the mall." And he is talking about his plan for a future action. So if the main clause is in the simple present, the reported speech is also in the simple present,
Joe says he is going to the mall.
But since Joe was talking in the past, both clauses should be converted to the past tense, hence the first example.
There are some situations where you can't further backshit the form of the verb and thus backshift is not used. For example, when the subordinate clause uses one of these modal verbs: should, could, would, might, or the subordinate clause is in the past perfect. In these situations the tense of the subordinate clause cannot be pushed further back.
When the statement made in the subordinate clause is a general truth, you don't need to backshift. In such cases, backshift is optional, but a lot of native speakers still backshift.
She knew the Sun was/is not the center of the universe.
So in this sentence if you don't backshift it is not a big problem. Either way is correct.
In your example though, backshifting is needed. Note it should be "speak on/over the phone", not "through". Without backshifting the sentence sounds awkward, because "it is rude to speak on the telephone" is not a general truth. It is a personal opinion. Of course that person can still hold the opinion now, but it makes much more sense to state the thought as a past event.
They thought it was rude to speak on the telephone.
The main verb "thought" in general requires the subordinate clause to be in the past, because you are describing people's thought in the past, and thought occurred in the past. But that doesn't mean backshifting is always demanded. In some cases, you don't backshift because you don't need to since the statement in the subordinate is already a past event. For example:
Mel said she had to go to the bathroom.
Reported under "thought":
I thought Mel said she had to go to the bathroom.