The outage began at 4.30am on Wednesday and Telstra had restored phone calls by that night; however, Victoria's regional railway was still not completely back up and running by early Thursday evening.
V/Line announced it would gradually resume services from midday following extensive testing of train radio communications after the Telstra outage.
But a 6pm update issued by the transport operator said train services were still gradually returning across the network, with delays and cancellations expected to continue.
Although it was hoped services would be restored in time for peak hour, at least five departing from Southern Cross were cancelled.
Previously, V/Line chief executive Will Tieppo said work had been carried out overnight to repair connectivity between train radio systems and the control centre.
"We are now in the process of undertaking testing for each of the train units that we've got here in Melbourne," Mr Tieppo told reporters at Southern Cross Station on Thursday.
Victorian Premier Jacinta Allan demanded Telstra compensate affected Victorians, saying the disruption was unacceptable.
"V/Line will reimburse regional rail passengers who incurred extra costs," she said in a scathing statement on Thursday evening.
"I expect Telstra to match it, dollar for dollar."
Ms Allen said V/Line services would be free for two days to compensate commuters for the disruptions.
Some commuters were forced to spend Wednesday night in city hotels because V/Line did not have enough buses to replace more than 300 cancelled services.
On Thursday, platforms at the train station were largely free from traffic, while commuters filtered into the bus terminal for a limited number of replacement services.
V/Line staff were out in force, distributing snacks to families, couples and returning holiday-makers as service announcements were broadcast.
Elderly woman Pam Promnicz was having a hard time getting back to Warrnambool, concerned she had too many bags for the coach.
"I'd much prefer to be on the train," she told AAP.
Brian Rigby, a network engineer, said the disruptions could have been avoided if V/Line had not depended on the Telstra network.
"When Telstra has an outage, they're big ones," he said.
"It makes you wonder what happens if next time they go down and stay down."
On Thursday, Communications Minister Anika Wells said the telecommunications regulator ACMA had begun preliminary investigations into the outage, which affected transport, businesses, emergency services and health care.
In 2025, Ms Wells increased penalties for telcos that fall foul of their triple-zero obligations to $30 million.
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