This bug was fixed in the package cloud-init -
0.7.9-25-g65529b6-0ubuntu1

---------------
cloud-init (0.7.9-25-g65529b6-0ubuntu1) zesty; urgency=medium

  * New upstream snapshot.
    - ds-identify: fix checking for filesystem label (LP: #1663735)
    - ds-identify: read ds=nocloud properly (LP: #1663723)

 -- Scott Moser <smo...@ubuntu.com>  Fri, 10 Feb 2017 15:25:17 -0500

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

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https://bugs.launchpad.net/bugs/1663723

Title:
  zesty cloud-init doesn't know about ds=nocloud-net;seedfrom=

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