A fully digital differential pulse code modulation (d.p.c.m.) system has been constructed to provide a flexible and stable basis for subjective optimization of a technique for efficient coding of video telephone picture signals. The experimental encoder accepts a precoded 8-bit p.c.m. input and delivers a 4-bit d.p.c.m. output which may be corrupted by simulated channel errors before decoding and display. The implementation of the system is described and photographic results of the coding technique are presented.