Start with Congress regulating porn on cable, based on the premise they have that authority because it's a government regulated monopoly. Those monopolies are negotiated and granted by local governments. What gives Congress the authority to dictate the terms of those agreements?
See, now we can discuss your assertions:
Cable regulations are NOT merely negotiated and granted by local governments. They are negotiated and granted by local governments under terms set by the federal government, and cable companies are pressed into needing such permission as granted by local government because of regulations passed by the federal government.
IOW, even though the negotiations are conducted by local governments, their leverage in such negotiations are granted to them by the federal government. Hence, it is the federal government which indirectly authorizes pornography. Further, the 14th amendment binds the states to the 1st amendment, so it’s not as though the states would have any further legitimacy to regulate cable that the federal government doesn’t.
What remains is this: Because the federal government DOES regulate the very existence of the cable industry, what is provided by the cable industry is an action of the government, not of the free market.
Let’s not forget the issue: The cable industry was scrambling porn enough to motivate porn customers to buy descramblers, but not enough that children couldn’t clearly make out graphic depictions of sex, including violent and depraved sex, and couldn’t hear the screaming, etc. I know. I was a kid, and, for a few moments, I was amazed at what was on TV. Strangely, they did a far better job at scrambling the audio on the baseball games than on the porn. (I was mostly a good kid; my slightly delayed response was to go hunt for the scrambled MSG network, which carried Yankee games... but not so good that I considered that I’d be stealing the Yankees’ signal; I considered I’d been deprived of it when they took it off Channel 11.)
Devices were not available to prevent these “scrambled” channels to be seen. Many customers had only two choices: accept the semi-scrambled porn channels, or go without television. (In our case, we lived near enough a major city to get good broadcast reception, but wasn’t always the case.)
So what’s Ron Paul’s answer? My parents should have no access to the TV marketplace if they didn’t want me confronted with the temptation of watching porn? See, you can’t let the market fix the problem, because the free market isn’t existing. Ron Paul’s utopia sets the perfect as the enemy of the good.