In heavily congested packet-switched networks, instead of trying, a priory, to predict the load to the network for a particular set of users, a preferred approach may be to endeavor to control the load. In order to effect dynamic control of the network load, the user (video encoder), and the service provider (packet-switched network), must be interactively linked, in marked departure of traditional source - network separation. Moreover, the resulting source-network system must be capable to dynamically adjust the values of the average bit rate (B) and/or distortion (D) of the variable bit rate transmission source. Adaptive vector quantization has been employed to encode the image source with constant local picture quality: An activity index, A, has been used to classify image areas into two groups, active and non-active, according to whether A>T or A<T, respectively; T is a heuristic threshold value. For non-active areas, large block size is used, while for active areas the block size is small. Two codebooks are generated corresponding to each of the two groups of blocks formed. Linearized parametric expressions for B and D have been derived for 4x4 blocks and for several 256x256 8-bit images, of the form: B-∝=a+b*T and D=c+d*T. The value of m has been found to be approximately equal to 4.0 for all images studied, while a, b, c, and d vary with the image and can be initially estimated by sampling. By allowing the determination of the proper operating point value for T, these relations may provide the required "handle" to the source-network sytem to effect dynamic adjustments to the distortion, and thus the average picture quality level, and/or the average bit rate, and thus the source load to the network.