Yeah … the question is: where would the next Bell Labs come from for long term scientific endeavors? The national labs? But the funding there can be quite volatile … The universities? But it could run the risk of being too academic. There is a need for an environment like the old Bell Labs, with problems and opportunities coming from practical matters, yet with folks who are interested in solving the problems but not stopping at solving the problems only …

My recollection is that the operating telephone companies paid AT&T 1% of revenues as the license fee for use of AT&T's patents. This funded AT&T's engineering department as well as Bell Labs research, systems engineering and advanced development. Th other main chunk of civilian work was development engineering funded by Western Electric. Prior to the end of the anti-missile systems military work, the military budget was greater than civilian work.

Sometime prior to divestiture, the 1% may have been raised a little. There may have also been additional operating company funding for Bell Information Systems, which developed administrative software for their use.

The notion that Bell Labs was an idyllic competition-free environment is incorrect. In the development organizations there was fierce competition between developers of analog versus digital transmission systems, microwave versus coaxial cable systems, space division versus time-division switching, etc. There may have been less in the basic research, but having worked later with ex-research staff, I'm pretty sure there was considerable competition for resources, funding, and scientific credit and internal/external recognition.