You need to call the constructor like this:
telnetlib.Telnet.__init__(self, host, port, timeout)
You need to add the explicit self since telnet.Telnet.__init__ is not a bound method but rather an unbound method, i.e. witout an instance assigned. So when calling it you need to pass the instance explicitely.
>>> Test.__init__
<unbound method Test.__init__>
>>> Test().__init__
<bound method Test.__init__ of <__main__.Test instance at 0x7fb54c984e18>>
>>> Test.__init__()
Traceback (most recent call last):
File "<stdin>", line 1, in <module>
TypeError: unbound method __init__() must be called with Test instance as first argument (got nothing instead)