Stable funding for research was provided via a tax levied on the service revenues of most of the Bell operating companies, an approach approved by state regulators. The revenue from the services tax was more than sufficient to fund unfettered investigations over almost 6 decades into almost every aspect of telecommunications, from basic materials (and the associated physics and chemistry) to large-scale computing and networking platforms and systems. Over time, Bell Laboratories’ support for basic science and engineering led to major advances in telephony spanning terminals, switching, transmission, services, and operations. Out of the Bell System research program also came many world-famous innovations, including the transistor, information theory, the laser, the solar cell, communications satellites, and fiber-optic communications. Perhaps the most notable benefit of the research was the creation of the semiconductor industry as a result of the mandatory public licensing of Bell’s patent for the transistor. In addition, research in basic science at Bell Labs was recognized by six Nobel prizes for strides in quantum mechanics, solid-state physics, and radio astronomy.
A number of other companies were also involved at the time in developing new telecommunications technologies and equipment. The work of companies like GTE Automatic Electric, TRW Vidar, and Northern Telecom, along with Bell’s own Western Electric, pushed telephony forward through advances in handset design and digital switching, for example.
Bell Labs also served as an important nucleus for the broader telecommunications research community: in the predivestiture era, university researchers and telecommunications research leaders from around the world commonly spent summers or sabbaticals at Bell Labs, where they could conduct exploratory research that could not have been undertaken elsewhere.
Despite its many successes, there were many criticisms of the predivestiture regulated monopoly (and this report is certainly not calling for a return to the Bell System structure). For instance, until government actions forced a change, the Bell System prohibited the attachment of third-party equipment on customer premises, which many viewed as stifling innovation. Monopoly status also meant that there were few pressures on the Bell System for rapid innovation in its services, and a number of innovative technologies developed by Bell Labs either were not adopted or were adopted very slowly.
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