FWIW, the workaround I've been using for some time now is:
if [ \( "x$COLORTERM" = "xgnome-terminal" -o "x$COLORTERM" = "xTerminal" -o
"x$COLORTERM" = "xxfce4-terminal" \) -a "x$TERM" = "xxterm" ] &&
infocmp xterm-256color >/dev/null 2>&1; then
TERM=xterm-256color
fi
in my .bashrc or what have you. The "Terminal" was what worked in
Precise and prior; "xfce4-terminal" is what COLORTERM is now set to.
(The infocmp command verifies that there is a terminfo database entry
for "xterm-256color", so it doesn't get set and then terminal apps
haven't a clue how to talk to the terminal.)
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https://bugs.launchpad.net/bugs/778801
Title:
TERM unconditionally set to "xterm", regardless of config
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