So, how bad is it? Well, looking at a packet capture, you've got one byte of telnet data (an ASCII character) wrapped in a TCP header (20 bytes), wrapped in an IP header (20 more bytes), wrapped in an Ethernet frame header (14 bytes). All told, 54 bytes of overhead to send one byte of data. Fifty-four to one.
The only way to send more data than header is to cut-and-paste a pile of text into your terminal window. Then you'll get frames where there is more steak than sizzle.
The good news is that this is Telnet we're talking about. Grossly inefficient as it is, it sill walks very lightly on the paths of the network. Unlike, say, mulitcast video.
Just thought you might want to know.