[link to original on tumblr]
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At about 1:00, there's this phrase:
I was immediately reminded of the bass part in the second movement of Bach's Orchestral Suite No. 3 in D major, BWV 1068 because it does this same sort of thing:
(notation found here)
There's a diatonic descent (with almost every note doubled), and after every pair of notes, there's a change in the octave. While the note values are different, the phrase in "Waterfall" is even in D major, the same key as Bach's!
Despite the similarities, I'm not sure that this phrase in "Waterfall" is meant to be a quotation of Bach. I've found this same sort of phrase in a few other pieces (it's in Grieg's Holberg Suite, Op. 40, which seems significant because ELO covered his "In the Hall of the Mountain King" on On the Third Day), but I do think its appearance in that Bach piece is the most famous (that movement is probably more well-known as Air on the G String). Between that and the fact that the phrases are in the same key, I think that if it was intended as a quotation, it's a quotation of Bach's work.