The Australian Competition and Consumer Commission (ACCC) says Telstra is offering 42,000 customers refunds, free exit from contracts, or new plans after it admitted its promised maximum NBN speeds could not be delivered.

Telstra told the consumer watchdog 9000 of its customers on its 100/40 Mbps deal - or 100 Mbps download and 40 Mbps upload - and 50/20 plan could not receive those speeds.

The ACCC's investigation found many more customers were affected by limitations on fibre-to-the-node (FTTN) or fibre-to-the-building (FTTB) connections, meaning some weren't even getting the maximum speed offered on a lower-speed deal.

"We have had mis-selling of services where customers have been asked to pay extra," the consumer watchdog's chairman Rod Sims told Fairfax Media on Wednesday.

"Some customers have been approached and they've been asked to pay $20 or $30 extra per month and the service they were sold up to cannot be delivered.

"It's extremely serious."

The problem affected customers across a range of plans offered between September 2015 and November this year.

The consumer watchdog found 26,497 - more than half - of FTTN customers on the 100/40 Mbps deal could not get that speed, and 9606 of those consumers could not even receive the lower tier 50/20 Mbps speeds.

Telstra has promised to check newly connected customers' speeds, and offered compensation if they are below the advertised rates. The ACCC is asking other retailers for similar commitments.

The watchdog will continue to monitor cases where a speed can technically be delivered, but internet service providers have not bought enough capacity from NBN Co to provide advertised services.

Mr Sims said the results of the investigation clarify that speed problems are generally to do with retailers' capacity, and not the technology.

He said customers on FTTN, for example, are unlikely to receive the highest speeds, but could expect 25Mbps almost all the time.

"Going forward if you're a Telstra customer, and pretty soon with [other retailers], you'll  know the line will support the service you were sold, so if you're not getting the service you were sold you'll know it's very likely your retailer hasn't bought enough capacity off the NBN," Mr Sims said.

"So it's the retailer's problem, not NBN's problem."

The ACCC is asking all providers to advertise its expected typical speeds, especially during the peak period between 7pm and 11pm.

In a statement, the Australian Communications Consumer Action Network said: "It should be a warning to the industry that they should be actively looking after their customers and ensuring that the services they are selling can be delivered." 

Consumer group Choice's spokesperson Tom Godfrey said customers across Australia were paying for internet speeds they weren't getting.

"People with ongoing telco issues are also being reminded of their right to ask for a better deal. Consumers should be able to cancel their contract and leave without penalty if the problem is ongoing and the telco isn't providing its contracted service," Mr Godfrey said.

The news of Telstra's problems comes a little over a week since the ACCC released a draft report showing that, although the NBN can achieve maximum speeds of up to 100 Mbps, just 16 per cent of those on the network are using it at speeds above 50 Mbps.

Last month, the Telecommunications Industry Ombudsman said complaints about services under the NBN rose by 160 per cent.