This bug was fixed in the package cloud-init - 0.7.8-49-g9e904bb-
0ubuntu1~16.04.2

---------------
cloud-init (0.7.8-49-g9e904bb-0ubuntu1~16.04.2) xenial-proposed; urgency=medium

  * cherry-pick 18203bf: disk_setup: Use sectors as unit when formatting
    MBR disks with sfdisk. (LP: #1460715)
  * cherry-pick 6e92c5f: net/cmdline: Consider ip= or ip6= on command
    line not only ip= (LP: #1639930)
  * cherry-pick 8c6878a: tests: fix assumptions that expected no eth0 in
    system. (LP: #1644043)
  * cherry-pick 2d2ec70: OpenStack: extend physical types to include
    hyperv, hw_veb, vhost_user. (LP: #1642679)

 -- Scott Moser <smo...@ubuntu.com>  Thu, 01 Dec 2016 16:57:39 -0500

** Changed in: cloud-init (Ubuntu Xenial)
       Status: Fix Committed => Fix Released

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https://bugs.launchpad.net/bugs/1642679

Title:
  The OpenStack network_config.json implementation fails on Hyper-V
  compute nodes

Status in cloud-init:
  Confirmed
Status in OpenStack Compute (nova):
  Fix Released
Status in cloud-init package in Ubuntu:
  Fix Released
Status in cloud-init source package in Xenial:
  Fix Released
Status in cloud-init source package in Yakkety:
  Confirmed

Bug description:
  === Begin SRU Template ===
  [Impact]
  When a config drive provides network_data.json on Azure OpenStack,
  cloud-init will fail to configure networking.

  Console log and /var/log/cloud-init.log will show:
   ValueError: Unknown network_data link type: hyperv

  This woudl also occur when the type of the network device as declared
  to cloud-init was 'hw_veb', 'hyperv', or 'vhostuser'.

  [Test Case]
  Launch an instance with config drive on hyperv cloud.

  [Regression Potential]
  Low to none.   cloud-init is relaxing requirements and will accept things
  now that it previously complained were invalid.
  === End SRU Template ===

  We have discovered an issue when booting Xenial instances on OpenStack
  environments (Liberty or newer) and Hyper-V compute nodes using config
  drive as metadata source.

  When applying the network_config.json, cloud-init fails with this error:
  http://paste.openstack.org/show/RvHZJqn48JBb0TO9QznL/

  The fix would be to add 'hyperv' as a link type here:
  /usr/lib/python3/dist-packages/cloudinit/sources/helpers/openstack.py, line 
587

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