This is fixed in cloud-init 0.7.9.

** Changed in: cloud-init
       Status: Confirmed => 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:
  Fix Released
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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