Let me remind you:
http://en.wikipedia.org/wiki/Bell_Labs
“Bell Laboratories operates its headquarters at Murray Hill, New Jersey, and has research and development facilities throughout the world. Researchers working at Bell Labs are credited with the development of radio astronomy, the transistor, the laser, the charge-coupled device (CCD), information theory, the UNIX operating system, the C programming language, S programming language and the C++ programming language. Seven Nobel Prizes have been awarded for work completed at Bell Laboratories.”
Yep... backwards thinking and incapable.
Bell Labs was just a relatively small R&D outfit shared by AT&T and their subsidiary Western Electric. And yes, they did innovate things. The problem was that AT&T was neither willing nor able to convert this into national scale communications at the consumer level.
Their management was calcified, and as a monopoly, had no incentive to change, which would mean that Western Electric would have to retool and repurpose.
A good comparison was Ford under Henry Ford. After making the very successful Model T, the public wanted a heck of a lot more, but the most he was willing to give them was the Model A. He was so rigid he wouldn’t even allow a different body color than black.
And yes, some people were convinced that things were better when the only alternative was the Model T.