In this paper we present our efforts and ideas in designing a framework for networked virtual environment applications that incorporates real-time video communication between avatars. The system is primarily designed around scalability for large scale networked virtual environments. In order to achieve this, our approach is to optimize client responsibilities and make maximal use of direct client-client communication streams. Relying on a number of servers to transcode a high-quality video stream from each client into an arbitrary number of output streams is a solution that scales very poorly with a growing number of users. The main feature of importance for this paper is the ability to efficiently adapt bandwidth usage at client side through multiple multicast groups. Server tasks are reduced to the bare minimum, thereby ensuring a highly scalable end-result, depending only on the processing power of the connected clients. We do show however, that by introducing a simple server setup, the system can be adapted to be deployed on xDSL based access networks