It was forcibly funded as part of a consent decree from the US government that allowed AT&T to continue as a monopoly as long as they invested a percent of their yearly revenue (or profit? I forget) in research. AT&T, having no interest in changing their incredibly profitable phone network, then proceeded to do fundamental research, as required as a condition of their monopoly.
Decades later, AT&T was broken up into the baby bells and the consent decree was removed at that time. Bell Labs' fate was then sealed - it no longer had a required legal minimum funding level, and the baby bells were MBA-run monstrosities that were only interested in "research" that paid dividends in the next 6 months in a predictable fashion.
The funding model is an integral part of the story.
Decades later, AT&T was broken up into the baby bells and the consent decree was removed at that time. Bell Labs' fate was then sealed - it no longer had a required legal minimum funding level, and the baby bells were MBA-run monstrosities that were only interested in "research" that paid dividends in the next 6 months in a predictable fashion.
The funding model is an integral part of the story.