Agreed. Most people, when confronted with the choice of jail vs. doing what they are told, will do what they are told.

This works best if the individuals or companies doing this have a meaningful presence in your country and/or consider it a sufficiently relevant market.

If they don't, your critical infrastructure (Internet) just stops working until you conform to the standards set by those who write the software.

Sure, and then the governments are forced to tell the intelligence agencies they can no longer afford all the we-told-you-so consequential successful hacks that happened because of the back doors they demanded.

And the competent criminals will still be able to roll their own encrypted communications from existing open source libraries.

The only distinction there is Client/Server vs Peer/Peer, peer discovery is a thing, but other than that it's fundamentally the same problem with the same solution(s).