Is there any way so IIS could connect to LocalDB without using the NT SERVICE\NETWORK SERVICE
user account.
This account has not suitable permissions. I'm looking use some other default account or is there some way that I can use the NETWORK SERVICE
account without changing permissions?
Right-click your application and then click Properties. On the Directory Security tab, click Edit. In the Authentication Methods dialog box, clear the Anonymous Access check box, and then do one of the following: If SQL Server is on the same computer as IIS, select the Integrated Windows authentication check box.
Click the Add Connection button on the Database Manager toolbar. In the Connection name text box, type a connection name. In the Database provider list, select the provider that you would like to use to connect to the database. (For example, to connect to a SQL Server database, select the System.
You should use Shared Instances feature of LocalDB. These two posts on Using LocalDB with Full IIS should give you more information. Especially the second part seems relevant, but the first one contains some context as well.
(note: the original links are no longer available, using archive.org instead)
Original (non-working as of March 2019) links:
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