They were still in copyright battle with AT&T until 1994 and by that time it was too late, Linux was on its way.

This. Linux wasn't based on proprietary code, and wasn't saddled by any sort of license.

The original BSD that Bell Labs gave to Berkeley in 1974 was anything but open source. It was an operating system that Bell had provided to the university with source code available for modification and redistribution ONLY to other universities WHO ALSO HELD research licenses from Bell Labs.

And it still wasn't open-source in the early 90's when Berkeley scrubbed all the proprietary bits out of it and tried to sell it for profit. That's when AT&T sued them.

So even if you HAD a copy of the BSD source code pre-1994 it wouldn't have been the same as someone handing you code and asking for your advice on it. You would have certainly found yourself in court if you modified early BSD for redistribution.

A bit of revisionism going on there.

Bell Labs was allowed to finally start charging for UNIX after the split was done, so they went after the most attractive fish that were getting paid to sell UNIX, as AT&T wanted to bring it all back in house.

I guess that means the small dial-up ISPs started appearing before 1994 and ended up choosing Linux.

I remember that back then FreeBSD was seen as the serious OS and Linux was just an unstable toy. Reputable hosts used FreeBSD.