I found the below solution in another post. I just tried it and it is working for me. As soon as it comes to the "Updating Windows 10", I disable WiFi in the quick access menu. It stopped at 2% for while, but then started going. It would never get past 2%.
The solution in above blog does start the installation process but then error again showed up at 2% mark. Then I came a very simple solution on internet, simply disable internet after verification process of downloaded files, just when the installation starts. After that process went on smoothly and my computer is now on anniversary update.
http://forums.windowscentral.com/win...ml#post3533551