Its not essential.
FP 2000 sets up a DSN'less connection which is in fact faster than a DSN and requires no intervention by your host at all.A DSN lets the server know where to find the data files and of what type they are.
DSN used to be the main way to do this.
A dsn less connection performs the same task, but you can tell it where the file is (if you need to change it)
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