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The authors have recently proposed a paradigm that can potentially provide for considerably better interactivity compared to existing practices and can adapt immediately to interactive changes in client interests, such as forward or backward playback and zooming into individual frames. The proposed paradigm relies on JPEG2000 format for providing scalability, flexibility, and accessibility; and on transmitting a server-optimized selection of code-blocks and motion side-information. Motion compensation and conditional replenishment are employed to reduce needed bandwidth. This work extends the previous work by providing server and client policies that allow for a realistic implementation and by introducing the use of coarsely quantized code-blocks in improving prediction. This work introduces the concepts, formulates the policies and optimization problems, proposes solutions, and compares the performance to alternate strategies.