The operating companies were charged a 1% fee on revenues as a patent royalty and this funded Bell Labs Research, Systems Engineering, and part of Advanced Development of devices and systems. A similar amount was provided by Western Electric for advanced development, development and research on manufacturing technology. At times the research and development funding by the DoD was larger than the civilian part.
I was told that one reason that Bell Labs was formed from parts of AT&T Engineering and Western Electric Engineering was to keep the researchers from meddling with the business and to keep the business from meddling with the research. The latter was important because a strategic objective was to use technological change as a driver to prevent the monopoly telecom business from going to seed. Within Bell Labs there were often competing groups working on alternative next generation systems - analog versus digital, tube versus transistor, space division versus time division switching, coax versus microwave, microwave versus fiber, etc.
I was told that one reason that Bell Labs was formed from parts of AT&T Engineering and Western Electric Engineering was to keep the researchers from meddling with the business and to keep the business from meddling with the research. The latter was important because a strategic objective was to use technological change as a driver to prevent the monopoly telecom business from going to seed. Within Bell Labs there were often competing groups working on alternative next generation systems - analog versus digital, tube versus transistor, space division versus time division switching, coax versus microwave, microwave versus fiber, etc.