.TEL was launched in 2005 by the registry operator TelNic. .TEL was envisioned as a worldwide contact directory. For instance, if you had the TEL domain of a person or company, you could always look up their current email address or phone number. 
Name Servers & Telhost
Unlike most tlds, .TEL does not allow the registrant to set name servers for their domain. This means that .TEL domains also could not point to a hosting server to display a website. Also .TEL domains could not be parked.
Instead .TEL domains had to be pointed to the Telhost server provided by the registry operator. The Telhost server displayed the contact information for the registrant. The Telhost server had a password protected web based interface for registrants to input and update their contact information.
Telhost returned contact information in a well-defined format, so that an individual’s address book could automatically retrieve the latest contact information for someone based on their TEL domain. In theory you could call someone just by entering their TEL domain name instead of their phone number. In practice no major phone manufacturers supported TEL domain dialing. 
Reception by Domain Investors
Domain investors provide an aftermarket and informal sales force for TLDs. They also drive much of the initial launch volume. For the most part, domain investors did not buy .TEL domains. At the time, domain parking monetization was in full swing, and not being able to park a TEL domain was a major disadvantage for domain investors.
Reception by Domain Registrars
Registrars that wanted to launch TEL domains were required to modify their control panels so that .TEL domains could not have their name servers set. Furthermore, supporting Telhost required that registrars integrate with the Telhost API. The Telhost API automated the creation of Telhost accounts for registrants.
Many registrars, most notably Godaddy, decided the additional integration costs to support .TEL was not worth the potential revenue.
As of 2015, the .TEL zone size is 129,000 domains. The TEL zone has been shrinking for several years now.