If you have existing client then please uninstall the agent and install agent from the ePO server so the machines will be managed then will look for update from the ePO server rather than Internet.
If the machine is already managed then I will suggest you to look into Agent log why it's not able to pull the updates from ePO.
It's a fresh installation of the agent. is there any place in EPO where i can specify the first server where the client can check to get the update to be (EPO server) and if it's not available, the client can get the update from the net?
Yes, you can specify the in the agent policy (under repository tab=>please specify the repository name) from which you would like to pull the updates.