A system and method for digital live video transmission is disclosed. According to the system, live or full-motion video is transmitted over plain old telephone system ("POTS") wiring. Successive frames of a video image are captured or received in a source computer, and are then processed prior to transmission. A destination computer reverses the process after the image is received. Quad-tree encoding techniques are preferably employed. A unique YUV pixel representation scheme is used where the pixel data is truncated for further compression. Proportional dithering is applied to smooth the received image, which is preferably displayed on a video screen. Approximately 30 frames per second of video data is transmitted synchronously over twisted pair wiring at currently achievable baud rates.