The advent of the asynchronous time division (ATM) concept has created the opportunity to use variable bit rate (VBR) coding techniques for the coding of video services in broadband networks. The principles of VBR coding are explained, and the benefits-stabilized picture quality combined with a high bandwidth efficiency-are indicated. The results obtained with a hardware model of a VBR video codec are presented, and statistical multiplexing gain figures are given. A bandwidth allocation scheme is proposed that is based on the statistical characterization and policing of the VBR sources. It is concluded that this scheme offers high performance with a limited impact on the network and encoder complexity.