It is also happening to me in Ubuntu 10.10 and it seems to happen in
computers that need proxy to access internet. I've configured my proxy
in Gnome and set it to be applied system-wide. All applications are
working properly with the proxy (like aptitude) but add-apt-repository
gives the same error.

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https://bugs.launchpad.net/bugs/559008

Title:
  UnicodeDecodeError when adding a ppa with add-apt-repository

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