Not terribly relevant. They intentionally add series resistance so the line can be modulated by the carbon microphone as you describe in your next post. So why does it matter how good the batteries are if they add nearly a kohm to the circuit to your phone?
Yes, the telo is not putting out as much current or voltage, so it could either have a higher in line resistance or it could simply be running out of current. But since this current is spec'd and has been for a long, long time, there is no reason why it wouldn't meet that spec, even if only marginally. Otherwise it would be a reason for a lot of returns.
A mile of wire has very little effect on the resulting voltage at your phone. Do the math. I don't know what gauge they use or if it is even copper, but the resistance would have to be pretty high to drop 48 volts to 10 volts in just a mile. Your other post even talks about the resistance they add to the line in the CO. Another reason they add that is to protect the supplies from a short on the line. Instead of dozens or hundreds of amps flowing out of the CO it is a few 10's of mA.
There is no point in "simulating" a Ma Bell phone line because the line voltage varies as a signal to the CO. The phone doesn't care about the DC voltage on the line when it is off hook. The drop in voltage signals the CO that the phone is off hook.
I think it is likely that the supply in the Telo is not doing the job. It is rather inefficient to supply 48 volts to a 400 ohm load through
800 ohms. Perhaps you are right in that they have two supplies. One provides 48 volts at *very* light currents and when the phone is on hook, a second supply provides 10-12 volts to power the phone when off hook. I guess there are phones that need the 48 volts to power the electronics when off hook. There's not much to do, but I guess since modern phones are electronic they need power even to make the annoying bleep sounds which replace the ring of a phone (is it too much to expect them to rectify the ring voltage?). So if they expect 48 volts, I guess you need to give them 48 volts.So one supply to power the very light load at 48 volts and a second supply to power the phones when off hook and a third to supply the ring voltage. The ringer equivalence only specs the power available when ringing, not the DC voltages.
Another point is that if the off hook supply was not designed to work with carbon mics, it might be *too* stiff, not letting the mic modulate the line voltage. If they aren't monitoring the current, they wouldn't get much signal from the "real" phone.
But this is all speculation until someone opens the Telo case and starts tracing out some of the circuit. Like Matt says, contact Telo and see what they say.