It is not a utility, it is not a non-profit organization. People choose to use it, and hence they have to put up with their rules.
If they don't like it, they should stop using it and start using the open alternatives.
Consider, a "privately" owned company that opens its doors to the public is absolutely not allowed to refuse to serve someone on the basis of their skin color.
The fact is that when you open your service to the general public then you are no longer strictly speaking a "private" organization: you open yourself up to be regulated by the governments of those people you invite into your service. When you operate what can be argued is very close to a natural monopoly, you have even more duties.
A much better solution is switching to an open alternative.
By this logic facebook should also ban gay pride symbols because Russians use facebook...
So Facebook should ban any display of meat cause India, any display or criticism of Islam cause Saudi Arabia, anything related to homosexuality cause Russia ?
Facebook is still a private organization and will continue to censor as it sees fit. The only reason why this idiocy became big is that a prime ministrer from Norway has been censored. That's all. Facebook isn't a democracy.
Even an American COMPANY is subject to rules, which in turn are designed/evolved to satisfy objectives - they're not immutable natural law.
Even Milton Friedman conceded that government intervention was justified in the case of externalities or natural monopolies. Social networks are, by virtue of the network effect, arguably natural monopolies, and in that sense, could be considered a utility. As such, they might have to be regulated more tightly than ordinary small companies.
PS: I just meant to put emphasis on the company, not shout.
As someone has highlighted above, though - there is the coordination problem, that everyone (or at least most people) would have to migrate. (But then - it's happened: Friendster, orkut, ...)
What we have occurring in the modern world would be the same if a city sold all of it's roads to a private company and told its citizens their are no longer public spaces.
I cannot feel any sympathy for them.
If one loves the facebook world, then he has to understand the facebook rules. Ignoring them is a mistake on the user side, not FB.
And it follows that when 99% percent of the billion users will have just ignored the rules, then they will soon understand what it means. So they'll scream and ask governemnt to help them. Then the government will regulate 50% of facebook activities, and well, FB rules will be weakened a bit but officially enforced. People like me will say that society has one more problem, others will say that it's progress... And I'll be sad once again.
It might be perfectly legal, you still would not want that to happen and people expressing their concerns should never be shrugged off with the simplistic attitude of "but they are allowed to do that".
A lot of things which are allowed for a company is still not the right thing and should be called out.