The video compression techniques developed in the past deployed DCT (Discrete Cosine Transform) for removing spatial redundancies and MEC (Motion Estimation and Compensation) for removing temporal redundancies in the video stream. These techniques suffer from blocking artifacts and produces low quality compressed video when the bandwidth availability is low in case of simultaneous transmissions on the link. Many DWT based video compression techniques have been proposed, but, unfortunately no standard has been developed to deploy these techniques because either most of the techniques have not been implemented practically or desired results have not been obtained successfully. This study presents a new compression technique deploying DWT for removing spatial redundancies and MEC for removing temporal redundancies. 10% improvement in compression ratio is obtained using the proposed approach, when applied to already compressed format such as AVI, WMV etc. This work is a first step towards the development of scalable video codec using DWT and MEC, which can be deployed as a future video compression standard.