A coding scheme comprising interframe DPCM, sub-band coding and the discrete cosine transform is presented. The scheme has been expanded to include a multilevel video transmission which has resulted in a hybrid DPCM/DCT coding structure at its lowest level. This property is then used to transmit high quality video with full compatibility to existing hybrid based coding standards such as H.261 for videophone. In addition, for each level to be coded independently, a layer called the residual layer is generated at the lower level. Simulation results are presented for a two-level video transmission where the first and second levels are coded at the rates of 64 kbit/s and 4 Mbit/s, respectively.