URL was updated via JDK-8064924 to use ServiceLoader and work cleanly with modules. As part of this then the JDK 1.0 era mechanism using the java.protocol.handler.pkgs property was removed.
We have not seen much usage of legacy mechanism in a long time but there may be some large projects depending on it and the transition to move the custom protocol handler to a service provider may be disruptive and delay adoption of JDK 9.
This new bug is submitted to track re-visiting this part of the solution. One of the primary motivations for removing the legacy mechanism is that it wouldn't work during VM startup and couldn't be used to override core protocols. One approach is to have it work as a fallback to the ServiceLoader mechanism. If not found via ServiceLoader then use the search the packages in the property value. It may be that this mechanism should only work for protocol handlers that aren't packaged as modules.