Before someone tells to use the RH guided way I can tell it's broken too:

https://access.redhat.com/documentation/en-us/red_hat_enterprise_linux_atomic_host/7/html/installation_and_configuration_guide/setting_up_cloud_init

It does not set up gateway nor DNS server, so the machine is without the network that way too.

Is this a regression from older versions for you, or are you trying now for the first time?

Looking more closely at your config, could you try removing the first line ("network:") and see if that solves the issue?

I did do that, and it still fails. It still creates the DHCP config for eth0. This is the error in the logs now:

2017-09-08 03:13:14,313 - util.py[DEBUG]: Attempting to load yaml from string of length 1821 with allowed root types (<type 'dict'>,)
2017-09-08 03:13:14,317 - util.py[DEBUG]: Attempting to load yaml from string of length 0 with allowed root types (<type 'dict'>,)
2017-09-08 03:13:14,317 - util.py[DEBUG]: load_yaml given empty string, returning default
2017-09-08 03:13:14,317 - stages.py[DEBUG]: applying net config names for {'ethernets': {'eth0': {'nameservers': {'addresses': ['8.8.8.8']}, 'gateway4': '192.1
68.122.1', 'addresses': ['192.168.122.2/24'], 'dhcp4': False}}, 'version': 2}
2017-09-08 03:13:14,318 - stages.py[DEBUG]: Using distro class <class 'cloudinit.distros.rhel.Distro'>
2017-09-08 03:13:14,318 - __init__.py[DEBUG]: no interfaces to rename
2017-09-08 03:13:14,318 - stages.py[INFO]: Applying network configuration from ds bringup=False: {'ethernets': {'eth0': {'nameservers': {'addresses': ['8.8.8.8
']}, 'gateway4': '192.168.122.1', 'addresses': ['192.168.122.2/24'], 'dhcp4': False}}, 'version': 2}
2017-09-08 03:13:14,318 - util.py[WARNING]: failed stage init-local
2017-09-08 03:13:14,319 - util.py[DEBUG]: failed stage init-local
Traceback (most recent call last):
  File "/usr/lib/python2.7/site-packages/cloudinit/cmd/main.py", line 513, in status_wrapper
    ret = functor(name, args)
  File "/usr/lib/python2.7/site-packages/cloudinit/cmd/main.py", line 269, in main_init
    init.apply_network_config(bring_up=bool(mode != sources.DSMODE_LOCAL))
  File "/usr/lib/python2.7/site-packages/cloudinit/stages.py", line 642, in apply_network_config
    return self.distro.apply_network_config(netcfg, bring_up=bring_up)
  File "/usr/lib/python2.7/site-packages/cloudinit/distros/__init__.py", line 150, in apply_network_config
    dev_names = self._write_network_config(netconfig)
  File "/usr/lib/python2.7/site-packages/cloudinit/distros/rhel.py", line 60, in _write_network_config
    self._net_renderer.render_network_state("/", ns)
  File "/usr/lib/python2.7/site-packages/cloudinit/net/sysconfig.py", line 509, in render_network_state
    network_state).items():
  File "/usr/lib/python2.7/site-packages/cloudinit/net/sysconfig.py", line 483, in _render_sysconfig
    for iface in network_state.iter_interfaces():
AttributeError: 'NoneType' object has no attribute 'iter_interfaces'
2017-09-08 03:13:14,351 - util.py[DEBUG]: Reading from /proc/uptime (quiet=False)
2017-09-08 03:13:14,351 - util.py[DEBUG]: Read 10 bytes from /proc/uptime
2017-09-08 03:13:14,351 - util.py[DEBUG]: cloud-init mode 'init' took 0.538 seconds (0.54)
2017-09-08 03:13:14,352 - handlers.py[DEBUG]: finish: init-local: SUCCESS: searching for local datasources

btw, this was the content of network-config file, it get's parsed ok it seems:

# cat /tmp/bastion/network-config 
version: 2
ethernets:
  eth0:
    dhcp4: false
    addresses:
      - 192.168.122.2/24
    gateway4: 192.168.122.1
    nameservers:
      addresses: [8.8.8.8]

(In reply to Ryan McCabe from comment #3)
> Is this a regression from older versions for you, or are you trying now for
> the first time?

I'm trying it for the first time, no regression that I could point out.

Could you try using the network_data.json format to pass in network settings. We don't have netplan (v2) support on rhel (or fedora).

what exactly to do here? I tried converting the network-data into json, and pasting it into file network_data.json and regenerated the config CD. Content of the file was now:

{
  "network": {
    "version": 2,
    "ethernets": {
      "eth0": {
        "dhcp4": false,
        "addresses": [
          "192.168.122.5/24"
        ],
        "gateway4": "192.168.122.1",
        "nameservers": {
          "addresses": [
            "8.8.8.8"
          ]
        }
      }
    }
  }
}


No network config got applied. I also tried renaming the file back to network-config within the CD, doesn't work either. Do you have any link to instructions on how to do that?

How should the network config be put into CD? What filename and which is the correct json format within the file?

Verified using cloud-init version 0.7.9.20
Using metadata format as per https://access.redhat.com/documentation/en-us/red_hat_enterprise_linux_atomic_host/7/html/installation_and_configuration_guide/setting_up_cloud_init

Addition to the comment above:
RHEL version: 7.4
RHEVM version: 4.2.0.2-0.1.el7

When will this be included into qcow image for KVM on the download page? That image is broken until it's included, currently it has this version according to details page: cloud-init-0.7.9-9.el7_4.1.x86_64.rpm 

https://access.redhat.com/downloads/content/69/ver=/rhel---7/7.4/x86_64/product-software

According to comment #14 moving to verified

Since the problem described in this bug report should be
resolved in a recent advisory, it has been closed with a
resolution of ERRATA.

For information on the advisory, and where to find the updated
files, follow the link below.

If the solution does not work for you, open a new bug report.

https://access.redhat.com/errata/RHEA-2018:0806