Three to become first European network to block ads

Some ISPs have already been adding ads. The only precedent here is that those guys are removing them instead.

Maybe we will live to see times when ads injected by ISP1 end up filtered by ISP2 and replaced with others by ISP3, all within a single TCP stream :)

1) any pricing that did this would have to replace ctr * ad_pricing(keyword, site) * (1 + VAT) + admin_cost(for keeping track of a billion customers) + cost per transaction from banks (2% + 0.25$ is typical)

So to replace a 1% CTR 5$ keyword ad (anything relating to financials, insurance or credit cards) we're talking a "micro"payment of at least 0.25 + 0.050.2 1.21 = 0.31 EUR. This is ignoring a number of costs (such as chargebacks). (assuming 21% VAT)

And here's how the money gets divided up in such a scenario:

Bank: 17 cents

Government: 10 cents

Site owner: 4 cents

Lowering the amount the site owner gets doesn't really reduce the amount the user pays. Anything less than about 30 cents is a non-starter. If you paid the site owner nothing, it would be 28 cents.

If we go through ad networks instead, and companies pay for ads through bank transactions, bank gets nothing (aside from the fees on business accounts on both sides, which aren't per-transaction costs), and the government gets 8% (assuming 33% profit margin for the ad network, which is high, and 25% corporate tax). If you "avoid" tax like most ad networks do, the government gets very little, 1-2% at most.

2) Starting this up requires violating a Nash-equilibrium. A huge number of people need to seriously damage their own business in order to make this happen before it can happen.

And that's ignoring problems that this would allow governments, banks, courts, ISPs and ... to block content based on controlling the financial system (which is a necessity to combat tax fraud anyway, blocking payments because either courts or governments don't agree with the transaction is something that constantly happens).

You could of course try to get the government to drop 90% of their VAT for internet transactions, and banks to stop charging for payments, and ... but good luck with that.