Abstract: A video encoding/decoding system based on 3D wavelet decomposition and the human perceptual model is implemented. JND is applied in quantizer design to improve the subjective quality of compressed video. The 3D wavelet decomposition helps to remove spatial and temporal redundancy and provides scalability of video quality. In order to conceal the errors that may, occur under bad wireless channel conditions, a slicing method and a joint source channel coding scenario, that combines RCPC with CRC and utilizes the distortion information to allocate convolutional coding rates are proposed. A new subjective quality index based on JND is presented and used to evaluate the overall system performance at different signal to noise rations (SNR) and at different compression ratios. Due to the wide use of arithmetic coding (AC) in data compression, it is considered as a readily available unit in the video codec system for broadcasting.