Yes, such rules would make companies focus on specific local market first and expand slowly. I'm not so sure this is a bad thing. As you said, it doesn't make a difference to existing big companies. Slower growth for new ones could make it more likely we end up with different competitors in different markets (fb west, vk russia, ...) instead a single winner taking it all. And if some potential ideas won't make it cause of slower growth and a some more administrative overhead, I still prefer that over some large foreign evil empire pushing its social norms onto my country.

Few people already could "enter the market" given the enormous resource requirements to compete with Facebook on it's own. That's not a regulatory thing; that's just a reflection of the reality that these large companies have massive amounts of resources, and similar amounts are needed to effectively compete.