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As the transmission rate gets large, differential pulse-code modulation (PCM) when followed by entropy coding forms a source encoding system which performs within 1.53 dB of Shannon's rate distortion function which bounds the performance of any encoding system with a minimum mean-square error (mmse) fidelity criterion. This is true for any ergodic signal source. Furthermore, this source encoder introduces the same amount of uncertainty as the mmse encoder. The 1.53 dB difference between this encoder and the mmse encoder is perceptually so small that it would probably not be noticed by a human user of a high quality (signal-to-noise ratio dB) speech or television source encoding system.