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This paper presents an algorithm to optimize the tradeoff between rate and expected end-to-end distortion of a video sequence transmitted over a packet network. The approach optimizes the source coding parameters, slicing, network QoS class selection and/or error control coding parameters, and accounts for the effects of compression, packetization, error propagation, and concealment at the decoder. It builds on, and substantially extends the applicability of, the recursive optimal per-pixel estimate (ROPE) technique for end-to-end distortion estimation. A trellis-based algorithm is introduced in order to overcome macroblock interdependencies in the estimation procedure, and allow adaptive slicing. Moreover, we propose a complementary packetization scheme to efficiently arrange the slices into packets for FEC protection while minimizing rate loss due to padding. Simulations demonstrate consistent gains over currently used techniques.