edge policy IntranetFileLinksEnabled enabled does not open file

Question

Last week Edge 95 was released bringing the new and long awaiting IntranetFileLinksEnabled policy.

Testing this I encounter a different behavior than expected.
Having the following test html file with links on a web-server e.g. http://demohost/ and having http://demohost/ added as "local-intranet" site.
Clicking the file links on e.g. http://demohost/test.html, I expect the file to be opened directly (e.g. docx in MS Word, pdf in Acrobat Reader, txt in Notepad ...):

<a href="file://power/share/demo.txt">file://power/share/demo.txt</a><br/>
<a href="file://power/share/demo.docx">file://power/share/demo.docx</a><br/>
<a href="file://power/share/demo.pdf">file://power/share/demo.pdf</a><br/>
<a href="file://power/share/demo.html">file://power/share/demo.html</a><br/>

But instead the share is opened in the explorer and the file is selected, but not opened. e.g. demo.docx or demo.pdf:

Are there any additional policies I have to configure to establish a similar behavior as the Internet Explorer used to have? (actually opening the files)

Result of edge://policy/:

EDIT: I tried out a lot of different GPO settings in "Microsoft Edge" and "Internet Explorer" category, e.g. PopupsAllowedForUrls. Didn't find a solution.

EDIT2: Also file links to a drive e.g. file://D:/temp/demo.txt are blocked completely.

Answer 1

This is by design and for sure because of security purposes.

If you read the policy documentation carefully, it is really good documented what is going to happen:

This setting allows file URL links to intranet zone files from intranet zone HTTPS websites to open Windows File Explorer for that file or directory.

If you enable this policy, intranet zone file URL links originating from intranet zone HTTPS pages will open Windows File Explorer to the parent directory of the file and select the file. Intranet zone directory URL links originating from intranet zone HTTPS pages will open Windows File Explorer to the directory with no items in the directory selected.

If you disable or don't configure this policy, file URL links will not open.

Microsoft Edge uses the definition of intranet zone as configured for Internet Explorer. Note that https://localhost/ is specifically blocked as an exception of allowed intranet zone host, while loopback addresses (127.0.0.*, [::1]) are considered internet zone by default.

Users may opt out of prompts on a per-protocol/per-site basis unless the ExternalProtocolDialogShowAlwaysOpenCheckbox policy is disabled.