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I met this problem and spent a couple of hours beofre fixing it accidentally.
When you see fail to connect to internet, instead of repeatedly trying to connect, you can try to restart. That means it will unpair first. After unpair, try to pair it again from the same place. Remember to use manual pairing.
Then, I see from my iphone screen that it discovered the update package, started to download it, and install it on the watch.
Topic:
App & System Services
SubTopic:
Core OS
Tags: