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I'm thinking it's the second one. Steam doesn't have a throttling option and their servers usually are high speed so you will most likely max out your internet traffic which makes web-browsing or anything else that needs the internet to slow down considerably. Nowadays most people have high speed internet so web-pages can be filled with a lot of stuff that makes it slow to load if you don't have a fast enough connection.
My suggestion is to only download when you don't need or plan on using the internet for anything else. Or if changing the setting in Steam where it asks you what kind of connection you have, actually does something then I'd try to select a lower option but I'm guessing it might have no effect.
To know for sure whether it's the first thing or the second thing then you should take a test at speedtest.net and then divide the download speed you get by 8 and that will tell you your max kb/s. For example my advertised speed is 5 mbps (5000 kbps) so it's 5000/8 = 625 kb/s which is usually what I see when I max out my internet on Steam and uTorrent downloads. Now compare that to the number in Steam and if it's the same or very close then there is no throttling by the ISP.
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