while i understand the premise behind this move (its always about money, aint it ? ;) ), it will have serious consequences:
less users from countries that do not get the service for free.
this leads to less of an incentive for bands from those countries to sign up, publish their music for free (or for money - doesn't really matter).
and that means that the sole reason for which i love last.fm - the amazing variety of music from every corner of the globe available on it - will be gone.
it will become just like any bog standard radio station, pushing britney spears, pussycat dolls and just5 (no disrespect - the mentioned are just not my thing ;) ).
im sure that others will agree that the amazing variety of music in the system is an enormous advantage of last.fm, and loosing it will lead to a slow decay of the service.

having said that - im in the UK, and will be receiving the service for free.
and having said _THAT_ i wouldn't mind at all if the service became a globally paid service, and everyone was required to pitch in to keep/raise the quality - i would pay for it myself.

so shouldnt they be cutt off from the global network, but still have a working 'web' of their own ?
They must have their own servers, anything going into that cable is just a 'foreign' request.

Those are important - sure, but i would gather they dont make up more then 40% of all requests.

But only some of the routes should be down, and they still should have a very large lan, with dns, www, email and anything else they have on the spot, and im willing to bet that the ISP's there have stuff like that.
IIRC the web wasnt just designed to be foolproof, it was also designed to be autonomus once disconected from other networks.
Or am i missing something here, and all that they have is cables, no other infrastructure ?