From the testing that you have already done, it does sound like it's a bad controller. But you can verify a few things first.
If you have power going to the brake controller (black wire), and you are getting a signal only when the brake pedal is pressed on the red wire, that part is functioning properly. You should get a signal from the blue wire when you press the brake pedal or hit the manual override lever. I recommend testing close to the controller rather than at the back of the trailer... view full answer...
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