The asynchronous-transfer-mode (ATM) transmission has been adopted by most computer networks and the broad-band integrated-services digital network. Many researches have been conducted to investigate the transmission of video services over ATM networks. The previous studies often concentrate on designing video coders or on designing network regulating policies that reduce packet loss effect. But our ultimate goal should be reducing the overall distortion on the reconstructed images at the receiver and this distortion contains two components: (1) source coding error due to compression and (2) channel error due to network packet loss. In general, a high output rate at a source encoder leads to a smaller compression error; however, this high bit rate may also increase lost packets and thus increase the channel error. In this paper, a popular two-layer coding structure is considered and the optimal quantizer step size for the enhancement layer has been studied under the consideration of the source-plus-channel distortion. Through both theoretical analysis and image simulation, we indeed find an optimal operating point that achieves the lowest total mean squared error at the receiver.