This seems to me to be a major bug in Windows 10. But you can stop Windows Update to recover your internet connection. If you go to Network & Internet in Settings, then WiFi, then click Advanced Options, you can set the network as a metered connection to stop Windows Update. I suggest you do this temporarily so that you can actually use the internet.
Here is a link to the issue in the Windows Feedback app, if you want to upvote it:
Windows-Feedback:?contextid=158&feedbackid=5a20e472-d39b-4b92-b291-0a7301c14621&form=1&src=2
(Paste it into Edge)
Update
I've started noticing my internet connection being ruined even when Windows Update is not updating. In the task manager, it shows Service Host: Local System using up all my bandwidth. I tried going to Start > All apps > Windows Administrative Tools > Services, finding Background Intelligent Transfer System, right clicking it and clicking Stop. This stopped svchost using up all my internet. (I couldn't try the metered connection trick on this computer as it's connected via ethernet to a range extender)
Not only is it my computer on which the internet becomes unusable, but every other device on the network. I don't know how Microsoft have achieved such a horrific bug.
Update #2
This might not just be a problem with Windows Update and the Background Intelligent Transfer System. It looks like other background processes are also hogging bandwidth, e.g. I'm currently updating Adobe Photoshop and the Adobe Installer process is using pretty much everything, and web browsing has slowed right down (although not as badly as when the former two are downloading stuff).
KB3172985
is one of the many cumulative updates.KB3172985
fixes about 12 serious defects in Windows 10. What exactly is your question? – Ramhound – 2016-07-18T18:00:04.113My exact question is in my original posting: how can I force Windows not eating up all my network bandwidth while downloading updates? I know when I had Win7, it always used to be implemented in a way that Windows only consumes "free" network bandwidth, but not grabbing everythin available – Erik – 2016-07-18T18:03:35.693
MS16-087: Security update for Windows print spooler components: July 12, 2016 – Ramhound – 2016-07-18T18:04:48.613
Windows 10 allows you to schedule a time it will check for updates. "My exact question is in my original posting:" - You should edit your question, so your question is clear, it currently is not. – Ramhound – 2016-07-18T18:05:25.327
Worth pointing out the update at most is only 914 MB. That is only if you don't have the previous fixes installed. – Ramhound – 2016-07-18T18:15:21.680
I know that I can schedule a time to download updates, but that's not what I'm looking for. What I expect from Windows update is to only use bandwidth at low priority, i.e. when other processes or devices don't need it. – Erik – 2016-07-18T18:30:48.457
Windows has never given you an option to determine the priority of Windows Update. It simply perform the update when you were not using the computer, and it still does, if you schedule it. – Ramhound – 2016-07-18T20:39:05.717