Effective February 15, Last.fm will charge $3 per month for access on iPhones, Android phones and home entertainment devices such as Sonos and Logitech’s Squeezebox. The exceptions are Microsoft’s Xbox 360, which includes Last.fm with a $50 per year Xbox Live subscription, and Windows Phone 7, which will remain free through 2011. Ads will be removed as part of the shake-up.

Last.fm’s website will remain free with advertising in the United States, United Kingdom and Germany, but Matthew Hawn, Last.fm’s vice president of product, explained in a blog post that an ad-supported service is simply “not practical” on other devices and in other countries.

Even if Last.fm paints this change as a necessity, it’s clear that the service hasn’t withstood licensing and royalty demands as well as competing services.

Pandora, for example, offers a $36 per year premium service but still allows 40 hours of free streaming per month. After that, you can pay $1 to keep listening. Slacker Radio gives away its basic service and charges $5 per month for premium features. On-demand services such as MOG, Rdio and Rhapsody charge $10 per month for streaming that can effectively replace your music collection. Outside the United States, Spotify offers ad-supported, on-demand music but charges a subscription fee for smartphone access.

The real problem is that Last.fm doesn’t have a tangible advantage over these other services, aside from Hawn’s subjective claim that its version of Internet radio is “the best in the world.” Without a freemium business model, Last.fm is going to have a tough time showing smartphone users what it has to offer.

The company says nearly two million people signed into Facebook from Xbox Live in less than a week since the feature launched on November 17. Almost one million people created Last.fm Internet radio profiles, and 1.7 million people checked out the Zune Marketplace, which is the Xbox 360′s new digital storefront for 1080p video. Microsoft suspiciously left out usage numbers for Twitter, saying only that the service “was abuzz” with Xbox-based tweets.

There is, of course, reason to be skeptical about these numbers and what they mean. Usually, Facebook and Twitter are only open to paid Xbox Live Gold subscribers, but from November 20 until yesterday, those services along with the rest of Xbox Live Gold were open to everyone in the United States, including non-paid Silver members. That means more of Xbox Live’s 20 million total active users may have tried the new services than usual.

And besides, trying doesn’t mean liking. I signed in to Facebook and sent a Tweet from Twitter, but didn’t particularly enjoy either experience. I fired up the Zune Marketplace but didn’t buy anything (and actually, I was sort of offended that music videos cost $1 to $2, when you can easily find them for free on YouTube). The only service I used in earnest was Last.fm, which came in handy for a party I happened be throwing over the weekend.

There was one statistic from Microsoft that was truly impressive: On November 10, launch day for Call of Duty: Modern Warfare 2, more than 2.2 million people logged in to play. It’s proof that no matter how hard Microsoft tries to show the value in all of Xbox Live’s extra services, it’s still all about the games.

Silver-level subscribers — i.e. the ones who don’t pay — can listen for “a trial period” of three hours per month, with occasional video advertisements, DeRosa said. Gold users will get unlimited ad-supported access. A third, commercial-free tier will cost extra.

That’s all good to know, but what’s really interesting is that Microsoft is finally opening the door to ad-supported content. In its current state, Xbox Live is transaction-based. You’ll get a free map pack here and there — and some of them have been sponsored by a third party — but most of the content on Xbox Live requires money, regardless of whether your a paying member or not. Last.fm is either an outlier or a sign of what’s to come.

With Twitter and Facebook integration coming to the service, I wonder if Microsoft has a similar ad-supported plan in mind. It seems likely, considering a recent report by MediaPost that says Microsoft will bring Silverlight to Xbox Live within a year, making it easier for advertisers to get their message onto multiple platforms. If there’s any Xbox Live feature that seems ripe for ads, it’s social networking.

Looking further ahead, could all of this signify a completely ad-supported Xbox Live, as Official Xbox Magazine suggests? I doubt it. My instinct says Microsoft wouldn’t want a free service to cannibalize the paid one, but I can’t say for sure without knowing the ratio of Gold to Silver subscribers, and the company doesn’t disclose that information. I do know that Xbox Live is rich with features, and sticking ads into all its nooks and crannies would be a Godawful mess.