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Summary form only given. We present a new wavelet coding technique, flexible block wavelet coding (FBWC). It is specially designed for delta frame compression. FBWC not only makes delta frame compression more efficient but also keeps the rate scalability and other scalabilities of wavelet based scalable video compression techniques. Based on this new delta frame compression technique, we have implemented a highly efficient rate scalable video codec. Its overall performance surpasses the video codec based on SPIHT and is comparable to that of H.263. Using FBWC, delta frames are compressed in three steps: First, we use motion compensation to eliminate the temporal redundancy between adjacent frames and the predicted error frames (PEF) are generated. Next, the PEF are transformed into the wavelet domain using the flexible block wavelet transform (FBWT). Finally, the zerotree coding mechanism and entropy coder are used to actually compress the FBWT transformed wavelet coefficients to the target data rate.