Don't know if you resolved this problem, but I have just resolved the same issue from the other side.
It appears Selenium and Firefox have difficulty talking to each other - I suspect Firefox 'evolve' changes over a number of releases, so backward and forward compatibility are not always guaranteed, and incompatibility always seems to generate the same error.
My problem started when I moved from FF 15 to FF 16. Running on Ubuntu, this happens auto magically along with other upgrades but I believe this was the critical change.
The problem was resolved by moving from Selenium 2.24.1 to Selenium 2.25.0
As the selenium change is just download the jar file and run it instead of the old one,it's worth trying this as a quick and easy troubleshooter - if it doesn't help, just switch back. In your case, I'm not sure which version of Selenium to try, but I think 2.24 should work with FF 10.
Another issue I have found in the past is that Firefox would not run as root on Ubuntu. This happens if Selenium is running as a service, or possibly if it is fired up from a bash script or cron job. This may explain why it runs for you but not for Jenkins.
I had a similar issue. Maybe this answer will help you as well.
It looks like you have two different errors going on:
Unable to connect to host 127.0.0.1 on port 7055
Error: no display specified
The reason for the Unable to connect
error is that the version of Selenium Server does not know how to work with the newer version of Firefox. You need to download a newer version of the Selenium Server that supports the newer version of Firefox.
The reason for the Error: no display specified
error is that Firefox is being launched, but there is no X server (GUI) running on the remote host. You can use X11 forwarding to run Firefox on the remote host, but display it on your local host. On Mac OS X, you will need to download XQuartz in order to use X11 forwarding.
You need to check the browser compatibility before opting to test with Selenium:
https://github.com/SeleniumHQ/selenium/blob/master/java/CHANGELOG
This might help to answer the above question.
Get the latest Selenium jars (2.30) for FireFox 19
You can download the latest jars (2.31 as of writing) here: https://code.google.com/p/selenium/downloads/list
I resolved this issue by downgrading my Firefox to an older version that had previously worked well with Selenium-WebDriver. In my case, I had to downgrade back to Firefox 18 and this version worked with Selenium 2.27
Here is the link to get older versions of firefox: https://ftp.mozilla.org/pub/mozilla.org/firefox/releases/
This issue has haunted me for long time and I have seen one working solution in case of Firefox was to use the upgraded firefox driver.
If your firefox upgrades are happening automatically than you may face this problem once in a while. Looks like Firefox guys are developing too fast, or they do not care about backward compatibility.
Every time I see this issue on my old scripts I check if the firefox version has changed since - most of the times it is.
Then I go to maven repo for selenium firefox driver repo - http://mvnrepository.com/artifact/org.seleniumhq.selenium/selenium-firefox-driver and download the latest version.
or update my pom.xml (if maven is used) with new version of firefox driver right now its - 2.40.0
There is no easy way to avoid this issue unless you really explicitly block the automatied update from firefox (You can do this (On Mac) in preferences - Advanced - Update - Select "Check for updates, but let me choose whether to install them")
If your scripts are running on a automated mode then you may want to disable updates. However this may create other issues. Since most people/user may have firefox updates enabled by default. So your application is not really being tested on any later versions.
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