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If someone uses my wireless network for illegal purposes, is it possible to know who it was, at least which personal computer or other device? How can a business give wireless access to guests, but protect itself against this type of illegal use? Can public hotspots do it?

thanks

The answer to your question depends entirely on the capabilities of your AP and your authentication infrastructure. Most APs don't support the kind of robust logging that you're looking for. One possible answer would be some kind of an authentication gateway, such as those sold by BlueSocket or Vernier Networks. This device would sit between the APs and the network. Upon associating to an AP, the user would be redirected to the authentication gateway, which would only allow access if the user was authorized, and which would keep an audit log in case illegal activity was later discovered to have occurred.

Frankly, if you have the motivation and expertise, you could probably build a linux-based device to do what you want. In fact, a quick web search reveals that someone may have done it already:

http://www.smoothwall.net

The type of functionality you're asking for is 100% possible--it's just a matter of finding a vendor who sells a piece of equipment to do it.