Works as designed.
Logging in from localhost is considered as secure by Dovecot, so you can telnet. But logging in without STARTTLS from external network is not secure, that's why Dovecot aborts your connection.
If you want to allow insecure connections for POP3/IMAP protocols, check this wiki tutorial: http://www.iredmail.org/wiki/index.php? … t.STARTTLS
WARNING: It's recommended to enable TLS for better security, do not disable TLS unless you clearly understand what it means.