The Australian Competition and Consumer Commission said today that the telco, Australia's largest, had promoted and offered speed plans which were not achievable in real-world conditions.
The plans were offered between September 2015 and November this year, through both Telstra and Belong brands.
The ACCC said this included a "Super Fast Speed Boost" which claimed speeds of 100Mbps down and 40Mbps up.
“Our investigation revealed many of Telstra’s FttN and FttB customers could not receive the maximum speed of their plan. Even worse, many of these customers could not receive the maximum speed of a lower-speed plan,” ACCC chairman Rod Sims said.
“In essence, people were paying more to get higher speeds that they just weren’t able to get.”
He said that Telstra acknowledged this conduct would have contravened Australian Consumer Law, "by engaging in misleading or deceptive conduct and making false or misleading representations".
Sims added: "All businesses have a responsibility to ensure that claims about the performance of their products or services are accurate.
"This is particularly important in cases where consumers sign long-term contracts to acquire a service. Telecommunications contracts are typically 12-24 months in duration and this can represent a serious financial commitment.”
Commenting on Telstra's move, Labor's Communications Spokesperson Michelle Rowland said the party welcomed the initiative to compensate the 42,000 consumers.
“It’s a tragedy that (Prime Minister Malcolm) Turnbull is spending $50 billion on a second-rate NBN that cannot even deliver the speeds that consumers are willing to pay for," she said in a statement.
“These developments make a mockery of Turnbull’s judgement on engineering and economics.
“Labor will continue to fight for better disclosure of maximum attainable speeds to ensure consumers on the NBN get a fair deal.”
Labor's Spokesperson for Regional Communications Stephen Jones said it was a tragedy that "Turnbull was spending $50 billion of taxpayers’ money on a second-rate network that is denying consumers the speeds they are willing to pay for".