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We propose a novel paradigm for interactive video streaming and we coin the term JPEG2000-based scalable interactive video (JSIV) for it. JSIV utilizes JPEG2000 to independently compress the original video sequence frames and provide for quality and spatial resolution scalability. To exploit interframe redundancy, JSIV utilizes prediction and conditional replenishment of code-blocks aided by a server policy that optimally selects the number of quality layer for each code-block transmitted and a client policy that makes most of the received (distorted) frames. It is also possible for JSIV to employ motion compensation; however, we leave this topic to future work. To optimally solve the server transmission problem, a Lagrangian-style rate-distortion optimization procedure is employed. In JSIV, a wide variety of frame prediction arrangements can be employed including hierarchical B-frames of the scalable video coding (SVC) extension of the H.264/AVC standard. JSIV provides considerably better interactivity compared to existing schemes and can adapt immediately to interactive changes in client interests, such as forward or backward playback and zooming into individual frames. Experimental results for surveillance footage, which does not suffer from the absence of motion compensation, show that JSIV's performance is comparable to that of SVC in some usage scenarios while JSIV performs better in others.