Password protecting your wifi would not prevent a knowledgeable user
from pirating bandwidth.  Using WEP or WAP or even MAC address
filtering would not prevent a knowledgeable user from doing so, though
it would certainly narrow down the number of attempts made on your
system, it wouldn't be sufficient to stop illegal usage of your
bandwidth.

Even if one were able to completely secure their wifi router *and*
their wired router and completely prevent unauthorized access to their
network, ip addresses can be spoofed, sending the police to your door
anyway.  Or someone could accidentally switch IPs from a log.

The problem here lies with the police not doing their homework.  They
took the simplest and easiest route without making any effort to
understand what could be happening or regard to possible innocence.
Our security forces have become so jaded that 'guilty until proven
innocent' is not only a belief, it's a methodology.

I'm reminded of the floating test for a witch.  Bind her hands and
legs and toss her in a nearby pond or lake.  If she floats, she's a
witch and hung or otherwise executed.  If she drowns, then she's
cleared of all charges.
-- 
Alan Young

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