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A wavelet-based spatially scalable video coding scheme with in-band prediction is investigated in combination with JPEG 2000 quantization and arithmetic coding. The wavelet decomposition of each frame of the video data is succeeded by the computation of a blockwise motion compensated prediction for the individual subbands. To achieve half-pixel motion vector accuracy, the shift-invariant overcomplete wavelet transform is exploited. Higher accuracy is obtained by additional interpolation of the overcomplete subbands to maintain spatial scalability. A blockwise decision is made between coding of the motion compensated prediction error (inter mode) or the wavelet coefficients (intra mode). The concept of in-band prediction can be easily combined with a conventional intra-frame wavelet coder. In this approach, JPEG 2000 arithmetic coding is applied to the resulting prediction error.