(407) Proxy Authentication Required.

This is a very common error message when you try to get a resource on internet through your application. Why you getting this error from your application not from explorer. The reason is very simple either you use LAN that requires proxy setting or you use proxy server.

Example :

DataSet myds = new DataSet();
//Set the system proxy with valid server address or IP and port.
System.Net.WebProxy pry = new System.Net.WebProxy("172.16.0.1",8080);
//The DefaultCredentials automically get username and password.
pry.Credentials = CredentialCache.DefaultCredentials;
GlobalProxySelection.Select = pry;
myds.ReadXml("http://msdn.microsoft.com/netframework/rss.xml", XmlReadMode.Auto);
myds.WriteXmlSchema(@"c:\\f.xml");
this.GridView1.DataSource = myds.Tables[2];
this.GridView1.DataBind();