Local System cannot connect to LocalDB 2012 on Windows 2012

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Scenario:

  1. Installed LocalDB 2012 64bit on Win2012
  2. Wix Installer installs a 64bit Window Service with its own DB
  3. The service cannot connect to the LocalDB

The error in the app's log is: "A network-related or instance-specific error occurred while establishing a connection to SQL Server. The server was not found or was not accessible."

The Event Log indicated that LocalDB is corrupt, however, following the normal fix of deleting and recreating instances was ineffective. I don't believe there is any corruption.

When we set the service to run as a specific local admin account, it works.

We didn't have this issue before, but we've since upgraded LocalDB and rebuilt the project and the installer.

We also didn't have this issue on Windows 7. I ran this process on my laptop and on a clean VM of Windows 7.

Does anyone know why I can't use a Local System account for LocalDB on Windows 2012?

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