Windows Updates not being delivered over LAN

My main PC is up to date but I have two other PCs to update to the Windows anniversary edition, so I proceeded to do so using Windows Update. However I realised that the un-updated PC was downloading the update from the internet, even though both computers are set to transfer updates over the network. Both computers are connected to a router with gigabit ethernet so it should be much faster than downloading over the internet but that isn't happening.
Please help, I don't want to have to redownload the anniversary update twice more, especially since I have Australian internet.

You raise a good question. I do not know how the windows update works via other networked PCs and I have the same situation in my home. As far as I know all the PC's individually download the updates as required. Maybe this is a feature that W10 has not fully implemented yet. It is also possible that I would never know when it is happening as I do not turn off internet access or track data usage.

Seems a bit strange considering how at one point everyone was complaining that it was terrible and telling everyone how to disable it

You can look in the Windows ~BT hidden folder (you have to check the box to view hidden files/folders in explorer) for the install.esd file which should be in the sources folder if the update is still on the computer that has already updated. Then do ESD to ISO:
ESD to ISO - Create Bootable ISO from Windows 10 ESD File - Windows 10 Forums

Save the ISO file to a network location and then you can mount it on the computers that have not been upgraded and start the upgrade locally by running setup.exe inside the mounted ISO file.

I have never noticed the upgrade from other PCs on the network working in Windows 10.