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There has been a growing demand for streaming media distribution over the Internet, which consists of heterogeneous end hosts with different capabilities and using various last-mile network connections. To provide end-to-end differentiated services of streaming media among heterogeneous users, an application-layer multicasting of layered encoded streams is presented. The proposed basic scheme incorporates the existing NICE protocol proposed by Banerjee el al. (2002) with layered multicasting similar to receiver-driven layered multicast (RLM) proposed by McCanne et al. (1996). The resulting protocol is further enhanced with an improved cluster-leader selection process and prioritized control packet treatments. By applying cumulative video encoding scheme, the enhanced protocol provides service differentiation among end hosts of different capabilities, allowing them to receive different video qualities corresponding to one or more layers of encoded streams. When compared with the basic scheme via simulation, the enhanced protocol provides better video quality, higher bandwidth usage, and lower loss rate.