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MPEG-2 is an international standard specifying a normative bitstream syntax that decoders must recognize and that allows flexible selection of detailed coding parameters at the encoder. The compression performance is therefore largely dependent on the encoder design and the difference in coded picture quality is present even among encoders developed by different codec makers at identical bit-rates. Conventional MPEG-2 encoders were also designed for high picture quality transmission at an adequate bit-rate, and the overhead portion occupancy in a coded bitstream can be ignored in the final picture quality. However, the unexpected increase in overhead portion occupancy might cause fatal picture quality degradation at extremely low bitrates. To overcome this problem, we investigated an optimal design for an MPEG-2 encoder for use in HDTV digital terrestrial broadcasting where the available bit-rate is limited to less than 0.2 bit/pixel. In our study, advanced key technologies which have not been clearly recognized until now were introduced into possible optimization points, picture type selection macroblock coding mode selection and rate control, and a significant coding gain versus conventional encoding schemes was confirmed in coding experiments.