Telnetd is deprecated here. When I started hosting professional web hosting in 1997, telnet was the standard way to log into servers. FreeBSD, which we used, didn't integrate SSH into the base system until 2000. In practice, no credentials were known to be compromised by sending them in plaintext. I recall a pretty rapid industry switch from telnet to SSH when it became available outside of OpenBSD.
It was pretty easy to get someone's password by tailing /var/log/messages and waiting to see a auth failure followed by a success with a totally different username (i.e. not what looks like an entry correcting a typo). That only worked on shared hosting environments, of course.